PLANSPONSOR - February/March 2019 - 18

Upfront
The Effect
Of Market
Volatility on
Millennial
Nest Eggs
OFTEN touted as the generation most
confident about technology and their
concern for the environment, Millennials
can have this same confidence when it
comes to market instability, experts say.
For this group of workers, volatility, such
as was felt last year, has a benefit: They
can assume greater risk, given the large
gap between now and retirement.
" For Millennials, it's all about their
risk capacity, because they have so much
time, " says Katherine Roy, chief retirement
strategist at J.P. Morgan. " The volatility
they're experiencing is quite small
relative to the value that their contributions
are making, so they can take on
sufficient risk and benefit from their 30to
40-year horizon. "
Roy urges Millennials to focus on
retirement saving. She points out that,
while workers are often defaulted into
a defined contribution (DC) plan when
beginning employment, few take the
initiative to increase contributions during
their later working years. Instead of
contributing the suggested 10% to 15%
of pay throughout their career, some
settle on the initial 3% to 6%, failing to
self-grow the rate, she says. Acquiring
a " high-savings " mentality, she adds, is
how Millennials can thrive in periods of
market uncertainty.
" When the markets become volatile,
if you're a Millennial, your best option is
to be saving enough, because that's going
to be the key to your success-specifically,
early in your career, " she says. " That will
have a much more meaningful effect on
wealth accumulation for retirement than
your return. "
Market volatility can represent buying
opportunities for Millennials, as stock
prices will be lower; however, uninformed
employees may feel insecure-usually
younger Millennials just beginning their
career, says Tina Wilson, head of investment
solutions at MassMutual. Even
older Millennials-those in their early to
mid-30s-who are typically more established,
can experience bouts of financial
anxiety during market volatility, she says.
Wilson suggests plan sponsors and
advisers offer financial health or retirement
readiness scores to DC plan participants.
Throughout periods of market
swings and downturns, the score, which
indicates individuals' financial wellness,
can be an encouragement to nervous
Millennial workers looking to stay on
track with their savings.
Diving deeper into the distinction
between younger and older Millennials,
Wilson says plan sponsors and advisers
18 PLANSPONSOR.com February - March 2019
Art by Jesse Tise
should understand the significant
financial needs and common experience
of each group. For example, younger
Millennials, regarded as those in their midto
late 20s, will less likely remember the
economic collapse of 2008. Yet, workers in
their 30s will, as most had just entered
the workforce.
" We speak of Millennials as if they
are one cohort, and, while we label them
as one, there is a significant difference
between the older Millennials and the
younger, " Wilson says. " The younger
Millennials know nothing about 2008
and [the recession that followed]. So for
them, it's been a pretty strong market in
their working career. Older Millennials
obviously were affected by 2008, as were
the rest of us, but they've seen a pretty
strong recovery. "
For the Millennials-the same as for
all workers-plan sponsors and advisers
need to consider each group's particular
financial needs and experiences and then
craft education and savings messages
accordingly. -Amanda Umpierrez
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