According to our 2016 Survey of US Defined Plan Contribution Participants,1 Millennials contribute an average of 5.3% of their earnings to their retirement plans – compared to average annual contributions of 6.6% for Generation X and 8.6% among Baby Boomers. It stands to reason that contribution levels would increase as participants age, income increases, and retirement becomes less of an abstract concept and more of a financial reality. However, nearly three quarters of plan participants report that daily living and lifestyle expenses impede their ability to maximize their retirement contributions. Another 43% say the need to repay debt also adversely effects their contribution rate.1 Increasing contribution levels earlier could provide younger workers with a significant advantage in meeting their retirement funding goals. Our research suggests that introducing Millennials to investing strategies that resonate with their personal values could be one way to effect change in their retirement savings behavior.
Saving for a Purpose
Of Millennial plan participants we surveyed, 84% say they would like their investments to reflect their personal values. Seven in ten report being concerned about the environmental, social, and ethical records of the companies in which they invest. The same number say they would be more likely to increase contributions to their retirement plan if they knew their investments were doing good.1 ESG strategies may provide a way for Millennial investors to better align their efforts to achieve long-term financial goals with whatever social, cultural, and political values they hold dear. Notably, ESG strategies are not limited to natural resources or green energy. They also include issues ranging from responsible corporate governance and animal welfare to human rights and climate change. Like all investments, ESG investment strategies can involve risk. Investors of any age can work with a financial professional to help understand which approaches and opportunities might work best for them.
A Responsibility to the Future
Millennial investors face a range of challenges as they work to formulate their financial goals and devise a financial plan to attain them. Chief among these challenges are near-term obligations such as student loan debt. Nevertheless, by educating younger investors about potential opportunities in the ESG space that may correspond with their values, financial professionals could help inspire them to put some more of the dollars they earn today toward a better future.
Follow us on Twitter @NatixisIM and join the conversation about ESG and retirement planning using the hashtags #GenerationSave and #RetireResponsibly.
1 Natixis Investment Managers, Survey of US Defined Contribution Plan Participants conducted by CoreData Research, August 2016. Survey included 951 US workers, 651 being plan participants and 300 being non-participants.
Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices, therefore the Fund’s universe of investments may be reduced. It may sell a security when it could be disadvantageous to do so or forgo opportunities in certain companies, industries, sectors or countries. This could have a negative impact on performance depending on whether such investments are in or out of favor.