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Is the Word “Retirement” a Dinosaur for Younger Savers?

A recent 403(b)wise webinar featured some enlightening discussions between female financial educators regarding their retirement and general financial situations. The first speaker, 30-year-old Tara Slyman, commented that when previously asked about her plans for retirement, she responded that she had not thought about it and felt as though retirement investing “was for rich white guys in their mid-50s/early 60s.”

Tara, as witnessed by her presentation, is far from ignorant about finances. In fact, she is managing her money better than most. However, until recently, rather than addressing retirement and other long-term investment goals, she was instead focused on shorter-term financial issues, such as paying down debt. For Tara, investing for retirement was something that older people did. Now, to Tara’s credit, she started seeing the merits of investing for retirement last year and has since incorporated it into her overall financial plan. However, due to the magic of compounding, she missed out on some critical savings years.

This brings up a significant concern: If retirement plan sponsors and the retirement community cannot reach financially savvy people, like Tara, with the message that saving for retirement is important, how can we move the needle with the vast majority who are not nearly as financially literate?

But what if instead of asking 20-something-year-old Tara about her plans for retirement, the question was positioned as, “What are your plans for your financial future?” Tara’s answer likely would have been different, since Tara perceived retirement as some distant future event, and not something of immediate concern.

A number of retirement plan language studies have revealed the importance of avoiding common industry jargon, like “sequence of returns risk,” “revenue-sharing,” and even “target date funds,” when communicating with participants. But there is one particular industry word that may be most likely to turn off younger employees, like Tara, for whom it is critical to start saving early – and that is, retirement. While the word “retirement” is not going away anytime soon, perhaps, in order to motivate the one group for whom it is critically important to save — those in their 20s — we need to make the notion of saving for retirement more attractive.

And, if using a phrase like “financial independence,” “financial future,” or “financial freedom” has a positive effect on twenty-something retirement savings, then why not adopt it more broadly with that population? If Tara’s twenty-something self is an indication of her demographic, saving for retirement is something that dinosaurs do - not young people.

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Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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