Retirement insights from a Colorado PERA perspective

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In this story:



<ul>
<li>Members of Generation X and Millennials are more concerned than other generations about their ability to save enough for retirement</li>



<li>Younger generations are also more likely to be worried about the effects of the pandemic on their retirement planning</li>



<li>Generations agree on the value of defined benefit plans like Colorado PERA</li>
</ul>



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A <a href="https://www.nirsonline.org/reports/generations/" target="_blank" rel="noreferrer noopener">recent survey</a> by the National Institute on Retirement Security found that Americans who fall into the Generation X and Millennial categories are more pessimistic than older generations about their retirement prospects and are more likely to be concerned about how the COVID-19 pandemic might have affected their retirement plans.



The survey also found the various age groups have some important points of agreement, including the overall state of retirement security and the need for greater access to retirement plans like those offered by Colorado PERA.



<h4 class="wp-block-heading">Where the generations differ in retirement outlooks</h4>



The National Institute on Retirement Security surveyed 1,203 people in December 2020. For the purpose of the survey, Millennials were defined as those who were 25 to 43 years old, Generation X as 44 to 55 years old, Baby Boomers as 56 to 74, and the Silent Generation as anyone 75 and older.



NIRS found that while the generations agree that there’s a retirement crisis in the United States, Generation X and Millennials have generally more pessimistic views of the situation. Seventy-two percent of Millennials and 59 percent of Generation X said they’re concerned about achieving a financially secure retirement, versus 43 percent of Baby Boomers and 26 percent of the Silent Generation.



Additionally, 64 percent of Millennials and 54 percent of Generation X said they’re more concerned about their retirement in light of the COVID-19 pandemic, while 42 percent of Boomers and 25 percent of the Silent Generation said the same.



The younger generations were also far more likely to have dipped into their emergency or retirement savings during the pandemic, according to the survey.



<h4 class="wp-block-heading">Where the generations agree</h4>



The <a href="https://www.nirsonline.org/reports/generations/" target="_blank" rel="noreferrer noopener">NIRS survey</a> found broad agreement across the generations on the challenges workers face while saving for retirement, with large majorities of each group saying the average worker cannot save enough money for retirement on their own.



The four generations also agree that it’s important to provide for retirees. Majorities of each group support Social Security and would be in favor of increasing contributions. Each group also agreed on the importance of defined benefit retirement plans, also known as pensions, which provide retirees with a lifetime benefit they can’t outlive. Eighty-one percent of Millennials described their views of pensions as favorable, and 68 percent of the Silent Generation said the same. All four generations agreed that every American worker should have access to a pension plan.



<h4 class="wp-block-heading">Where PERA factors in</h4>



In Colorado, the state’s largest workforce — public employees like state workers, teachers, corrections officers, snow plow drivers and others who serve our state — has access to a pension through Colorado PERA.<ins></ins>



PERA is a <a href="https://content.copera.org/survey-millennials-gen-x-especially-pessimistic-about-retirement-prospects/" target="_blank" rel="noreferrer noopener">hybrid defined benefit plan</a>, providing a defined benefit pension to most members and offering a choice between the defined benefit plan and defined contribution plan to others. Of those given the choice between the DB and DC plans, 9 out of 10 choose the DB option.



The average PERA member retires at approximately 59 years old and lives until their early 80s, receiving benefit payments from PERA every month while they’re retired. In 2020, PERA paid more than $4.2 billion in pension benefits to more than 107,000 retirees living in Colorado, with an average monthly benefit of $3,204. At a time when many workers are anxious about their ability to save enough for retirement, defined benefit plans like PERA not only provide peace of mind in retirement, they also serve as an effective recruiting tool for public employers looking to attract and retain employees.

Survey: Millennials, Gen X Especially Pessimistic About Retirement Prospects

<a href="https://content.copera.org/news-you-should-know-medicare-costs-in-2021/" target="_blank" rel="noreferrer noopener">What Will Medicare Cost You in 2021?</a> | Medicare



Medicare costs will change slightly in 2021. Find out what that looks like for you in this high-level overview. A reminder: If you are on a PERACare plan in retirement, you owe Medicare premiums for Part B coverage, but the Part A costs you see in this overview are replaced by the PERACare plan you have.



<a href="https://www.kiplinger.com/retirement/601791/when-only-one-spouse-retires">When Only One Spouse Retires</a> | Kiplinger



If you live with a partner, odds are you won’t retire on the same day. The gap between your retirement date and your partner’s could be months, or even years. That period can bring imbalance to your relationship as your day-to-day experiences diverge. But it doesn’t have to be that way. From practical matters to emotional considerations, this article walks you through how to prepare for this transitional time. And preparing isn’t just about avoiding pitfalls. If you do it right, this time can be full of opportunity.



<a href="https://crr.bc.edu/wp-content/uploads/2020/10/IB_20-15_.pdf">Does Late-career Nontraditional Work Improve Retirement Security?</a> | Center for Retirement Research at Boston College



Nontraditional jobs (defined as jobs that don’t offer health or retirement benefits) get a lot of attention these days. On the one hand, they can provide much needed flexibility and independence. On the other, the lack of traditional workplace benefits can leave some financially exposed. This paper looks at what effects these jobs have on retirement security for older workers. Those who are underprepared for retirement are more likely to switch to nontraditional work, which isn’t great news given the lack of retirement benefits. But the news isn’t all bad. Those who are more prepared can take advantage of the increased flexibility and explore the idea of a part-time retirement. As the study states, “extended careers are financially beneficial, even in jobs without health and retirement benefits.”



<a href="https://401kspecialistmag.com/millennials-gen-z-fear-long-lasting-negative-financial-impact-from-pandemic/">Millennials, Gen Z Fear Long-Lasting Negative Financial Impact from Pandemic</a> | 401K Specialist



One in four Millennials say the pandemic is putting them farther behind, financially. From putting off paying down debt to foregoing saving for retirement, the financial consequences of 2020 could be felt for years. Only one in four has an employer-sponsored retirement account and most lack a “strong role model for building retirement savings.”

News You Should Know: Medicare Costs in 2021

As the oldest millennials begin to enter their 40s, the topic of retirement increasingly becomes an important topic. Understanding such a large number of people—millennials includes everyone between 24 and 39, though those parameters can vary—has limitations. But studying the views, values, and behaviors of different generations can bring insight into what retirement might look like decades from now. 



Millennials do care
about retirement



It’s easy to find a meme or <a href="https://money.cnn.com/2017/05/15/news/millennials-home-buying-avocado-toast/index.html" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">cultural reference</a> that pokes fun at millennials for valuing immediacy at the expense of planning for the future. But research shows that millennials actually are focused on tomorrow. One <a href="https://www.businessinsider.com/millennials-saving-for-retirement-nearly-surpasses-gen-x-2019-11" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">study</a> shows that nearly half of millennials have a retirement savings account. Whether that number means the glass is <a href="https://www.nytimes.com/2020/01/31/opinion/sunday/student-loans-retirement-millennials.html" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">half full</a> or <a href="https://www.marketwatch.com/story/do-millennials-really-deserve-a-gold-star-for-retirement-saving-2020-02-18?mod=mw_latestnews" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">half empty</a> is up for interpretation, but, according to <a href="https://www.businessinsider.com/millennials-saving-for-retirement-nearly-surpasses-gen-x-2019-11" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">some</a>, it’s at least on par with the generation ahead of them.



Generational
differences exist, but so do generational similarities



Separating people into groups might suggest that the differences among them are more numerous and dramatic than they might actually be. Research released last year <a href="https://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2019_sr_what_is_retirement_by_generation.pdf" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">shows</a> that 76 percent of millennials “discuss saving, investing, and planning for retirement with family and close friends,” which is slightly higher than generation X and baby boomers. They talk with financial advisors at about the same rate as generation X and baby boomers. That being said, more millennials say they are procrastinating on taking necessary action on retirement than older generations. 



Millennials also think about long-term issues: They are concerned about their health in old age and place a high value on access to an employer-based retirement plan at the same rate as the other two generations mentioned in the study. Millennials who participate in a workplace retirement plan contribute a median amount of 10 percent of annual salary (however some experts <a href="https://www.cnbc.com/2019/10/23/millennials-need-to-save-an-huge-percent-of-paycheck-to-retire-at-65.html" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">say</a> that millennials should be saving at least 15 percent, due in part to increasing longevity rates). 



Millennials value
stability, community



A new study about <a rel="noreferrer noopener" aria-label=" (opens in a new tab)" href="https://www.nirsonline.org/reports/state-and-local-employees-views-their-jobs-pay-and-benefits/" target="_blank">Millennials who work for state and local governments</a> indicate that they value serving their community, as well as the benefits they receive as employees. Nearly 90 percent are “satisfied with the ability to serve the public,” and nearly three quarters said a pension benefit was a major reason they chose their job. Nearly all respondents said pensions provided an incentive to make public service a career, and most are confident they will be financially secure in retirement. 



The bottom line for
PERA members



It’s never too soon to start planning for retirement, even if the plan gets revised from time to time. This holds true for the more than 80,000 PERA members who are under 40. PERA members automatically make monthly contributions to fund their retirement, and PERAPlus allows members to take control of additional retirement savings. The lifetime nature of a Defined Benefit helps offset longevity risk (outliving retirement income), and being able to continue building a benefit at any of hundreds of employers in Colorado gives people the ability to serve their community, build a career, and feel financially secure in retirement.

Millennials, and Their Attitudes Toward Retirement

Recent research by the <a href="https://www.nirsonline.org/" target="_blank" rel="noreferrer noopener">National Institute on Retirement Security</a> (NIRS) found that 90 percent of those in the Millennial Generation (born between 1981 and 1996) participate in an employer-sponsored retirement plan when one is offered. This is good news for Colorado’s public employers who offer PERA when it comes to recruiting the next generation of public employees.



Millennials, numbering 83.2 million, are the largest, best educated, and most diverse generation in U.S. history according to the <a href="http://www.pewresearch.org/topics/millennials/" target="_blank" rel="noreferrer noopener">Pew Research Center</a>. And while many millennials entered the workforce during an economically stressful time, <a href="https://www.nirsonline.org/wp-content/uploads/2018/02/Millennials-Report-1.pdf" target="_blank" rel="noreferrer noopener">NIRS research shows</a> that they are just as motivated to save as older generations, if not more.



As the report explains, workers who are both offered and eligible for an employer-sponsored retirement plan choose to participate about 95 percent of the time across all generations, and millennials are right in line with that average, with a 94.2 percent participation rate.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="362" height="459" src="https://content.copera.org/wp-content/uploads/2024/04/Fig3-Millennial-Article-1.png" alt="Chart comparing the high rates at which millennials, genx, and boomers choose to participate in employer-sponsored retirement plans, indicating similar levels of participation across these generations." class="wp-image-45246" srcset="https://content.copera.org/wp-content/uploads/2024/04/Fig3-Millennial-Article-1.png 362w, https://content.copera.org/wp-content/uploads/2024/04/Fig3-Millennial-Article-1-237x300.png 237w" sizes="(max-width: 362px) 100vw, 362px" /></figure>



Despite their high rate of participation in retirement plans when eligible, many millennials worry about their retirement security, and for good reason. NIRS notes that nearly half of millennials are concerned that they will not be able to retire when they want to, while two-thirds are concerned about outliving their retirement savings.



But because many millennials are not eligible to participate in employer-sponsored retirement plans, even when they are offered to certain employees, only about one-third (34.3 percent) of millennials actually participate in an employer’s plan.



According to NIRS, “nearly half of millennials that do not participate in an employer-sponsored retirement plan cited part-time work or lack of tenure with their employer as a reason for not participating in a plan, rather than economic reasons such as student debt.”



However, millennials who work for an employer that offers PERA or similar public employee defined benefit plans, are automatically starting to save toward retirement – and have the option to save even more by contributing to the PERAPlus 401(k) or 457 Plans. These plans require no minimum contribution amount and vesting is 100 percent from day one.



For those millennials who do not have access to an employer-sponsored retirement savings plan, the news isn’t so good. NIRS says that two-thirds of the millennial generation have nothing saved for retirement.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="701" height="360" src="https://content.copera.org/wp-content/uploads/2024/04/Fig16-Millennial-Article-1.png" alt="Pie chart showing 33.9% of all working millennials have retirement savings, and bar graph comparing percentages of millennials with no savings by race: white 59.9%, black 70.3%, latino 67.0%, asian 82.9%." class="wp-image-46349" srcset="https://content.copera.org/wp-content/uploads/2024/04/Fig16-Millennial-Article-1.png 701w, https://content.copera.org/wp-content/uploads/2024/04/Fig16-Millennial-Article-1-300x154.png 300w" sizes="(max-width: 701px) 100vw, 701px" /></figure>



NIRS: <a href="https://www.nirsonline.org/wp-content/uploads/2018/02/Millennials-Report-1.pdf" target="_blank" rel="noreferrer noopener">Millennials and Retirement: Already Falling Short</a>



Millennials have longer tenure in their first jobs than did previous generations.



The NIRS report also debunks the common myth that millennials are loathe to stay in a job for very long. When different generations are compared on the aspect of job tenure, millennials actually spend more time in jobs early in their careers than Generation Xers or Baby Boomers. A study conducted by the U.S. Bureau of Labor Statistics <a href="https://content.copera.org/good-news-for-millennials-with-access-to-retirement-plans/" target="_blank" rel="noreferrer noopener">tracking Boomers throughout their work-lives</a> found that Boomers held short tenures with their employers during their younger years. Specifically, it found that, of the jobs that Boomers began when they were 18 to 34, 69 percent ended in less than a year and 85 percent ended in fewer than five years. The NIRS research concludes that “millennials are job-hopping at similar or even lower rates to their Gen X and Boomer predecessors.”



PERA’s hybrid defined benefit plan is a particularly strong recruitment and retention tool because of the value it offers to employees regardless of the length of their career. PERA’s plan design has evolved to serve both long-service employees as well as those who only work for a short time in public employment. This benefits Colorado’s public employees, their employers and the valuable services delivered to Colorado taxpayers.

Tag Archives:

Survey: Millennials, Gen X Especially Pessimistic About Retirement Prospects

News You Should Know: Medicare Costs in 2021

Millennials, and Their Attitudes Toward Retirement

Good news for millennials with access to retirement plans

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