Embracing a Millennial Retirement Mindset

Jun 25, 2023

When it comes to Millennials’ retirement saving efforts, they have their work cut out for them.

Born between 1981 and 1996, roughly 72 million people comprise the Millennial generation, which is currently the largest of the five generations in the workforce.1 Putting it into a sociohistorical context, this means that most Millennials watched the events of 9/11 unfold, were among social media’s first adopters and entered the workforce around the time of the Great Recession.


The financial crisis isn’t the only economic hardship this group has had to face. They amassed more student debt than previous generations and are now navigating the effects of inflation and market volatility. Now as Millennials are starting to turn 40, it’s easy to see why many Millennials feel the pressure related to retirement planning. 


This unique position means that Millennials may require additional support and guidance when it comes to saving for retirement—no matter where they are on their journeys.


Sustainable Investing—Where Purpose Meets Performance

A strategy that’s gained considerable traction, sustainable investing seeks financial returns from investments and companies that generate positive environmental and social impact.What constitutes positive impact? There are multiple approaches to consider taking when seeking to maximize positive impact to retirement savings – consider the following: 


  • Select investments from managers that are taking an intentional approach to sustainable investing by incorporating environmental, social and governance (ESG) criteria or targeting themes like climate change, gender equality or affordable housing. 
  • Select managers who are influencing portfolio companies through active ownership like proxy voting or resolution filing. 
  • Select managers from diverse backgrounds to drive inclusion. 


Positive impact to retirement savings is only part of the equation—the other element is performance of sustainable investments. While past performance does not guarantee future results, investments incorporating ESG criteria can perform, and in some cases, have performed in line with or better than conventional benchmarks for comparable investment options. 5


Consider the MSCI KLD 400 Social Index. It consists of 400 large-, mid- and small-cap U.S. companies that meet the highest ESG criteria standards. With 10.6% in annualized returns since 1990, it has performed slightly better than the S&P 500’s 10.2% during the same time frame.6

The biggest myth—and until recently, the biggest obstacle to the pursuit of sustainable investing—has been that to invest sustainably, one must sacrifice returns.
Audrey Choi
Chief Marketing Officer and Chief Sustainability Officer, Morgan Stanley 

Alignment to the Millennial Mindset

If there was a retirement planning strategy seemingly tailor-made for this generation, perhaps it’s the one invested in making a positive impact on environmental and social issues. 


The sociohistorical context in which millennials grew up shaped many of their worldviews—from 24-hour news cycles to social media literally at their fingertips. This generation, which is also one of the most ethnically diverse, tends to actively champion topics like climate change, diversity, equity and inclusion.


Perhaps the best proof of alignment is Millennials’ sentiments around incorporating sustainable investments into their 401(k) plan accounts. 

What You Can Do

There are a variety of ways to help Millennials prepare for retirement. With 93% of employees identifying retirement planning resources as a priority in their employment decisions, these can be powerful recruiting and retention tools for employers.9 

  1. 1
    Consider adding sustainable investing options to your retirement plan menu

    Your Morgan Stanley Financial Advisor can help create a roadmap for your organization. 


    Leverage Morgan Stanley Impact Quotient® impact reporting to assess the alignment of your plan with your plan’s environmental and social goals. 

  2. 2
    Spread the word

    Let eligible employees know they have access to sustainable investment options available to them in your retirement plan’s investment lineup, whether these options are a recent addition to your plan menu or already offered as an investment option. Typically, new plan participants invest in the qualified default investment alternative (“QDIA”) under a plan, so if a sustainable investment options is not selected as the plan’s QDIA, such new plan participants may miss these other investment options. 


    Educate your workforce. This can help reduce barriers to plan participation, such as concerns over investment performance or overall understanding of the topic. 

  3. 3
    Consider retirement plan features like automatic enrollment and auto escalation

    Auto enrollment is exactly what it sounds like. Auto escalation routinely increases participants’ contribution amount over a set time. Both are effective at increasing plan participation. 


    As always, Morgan Stanley at Work is here to help you with your plan investment decisions. Simply contact your Financial Advisor to take the next step.  

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