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Pentegra targets millennials with financial wellness advice

“If you think about a young adult who is just out of school in their first job, with the same stresses everybody else has, at the top of their list isn’t ‘How do I save money,’ ” Richard W. Rausser, senior vice president of client services for Pentegra, told the Business Journal.


Pentegra is a retirement plan and institutional investment firm headquartered in White Plains, which has more than $13 billion in assets under management. It has a regional office in Shelton, Connecticut, and additional offices in Vermont, North Carolina, South Carolina and Ohio. Pentegra recently published a report designed to help millennials improve their readiness for retirement and their overall financial condition titled “Pentegra Millennial SmartPath.”

Rausser said it takes education, not badgering, to help millennials get on the right financial path leading to a secure retirement. “Top of their list is ‘how do I make some money so I can spend some money and maybe pay down my student loans.’ ”

The SmartPath report describes millennials as “the first true ‘post-pension generation’ who in many cases must save for retirement largely on their own, with employer-provided pension plans not found as frequently as they once were.” It tells the reader that it was created to provide “valuable information to help you master the financial strategies you should look to adopt at this point in your life and help you on the path to greater financial wellness and retirement readiness.”

“The millennial piece is really focusing on the younger generation. These are the people who really are relatively early in their careers. They’re starting families. They’re buying homes for the first time and the one thing we know as a retirement services provider is that the first dollar, literally the first dollar a person saves, is the most valuable dollar they will ever have because of the long-term, tax-deferred compounding on the money,” Rausser said.

The report provides examples of how setting aside just a few dollars a day over a period of years can produce large sums, especially if saved in a tax-deferred retirement account earning an 8% annual return. Not having a $10 lunch once a week could produce a $41,519 boost in savings while skipping a cup of $4 gourmet coffee just once a week could add $16,608 to retirement funds.

The report discusses the characteristics of undiversified and diversified portfolios and examines common investing mistakes such as selling in a panic when values decline, investing too conservatively and forgetting to rebalance a portfolio’s asset allocation.

Rausser said even when millennials have invested in retirement plans, such as an employer’s 401(k), they may not be setting aside enough. “My kind of thinking is you need to be putting in at least 10% of salary, more likely up to 15% of pay, and I’m talking about gross pay,” he said. “Younger workers who don’t have experience in these types of plans, they almost need to be told what to do. They need a strong recommendation on how to do the right thing for themselves.”

The report identifies common situations encountered in life which should trigger fresh looks at an individual’s financial condition and retirement investments. These include getting a raise, getting married, buying a first house, having a child and changing jobs. Having a child calls for increasing cash reserves, increasing life insurance and starting a college fund. “When all your children have moved out of the house,” SmartPath says, it is time to “boost retirement savings contributions.”

Rausser said that it’s sometimes hard for people to comprehend just how dramatic the increase in the value of one’s retirement fund can be over time. One example in the report shows that $2,000 contributed annually in monthly installments to a plan which produces an average 6% annual return over a period of 40 years would produce an account balance of $331,922 at year 40.

Rausser had a personal anecdote to explain why Pentegra felt it was valuable to produce the report on retirement investing for millennials

“One of my millennial children said to me when I gave her advice, ‘how come they don’t teach this stuff in school?’ So, you’re getting into a practical, real-life work experience: competing demands; paying off student loans; finding their own housing; starting families. It’s a fair amount of financial pressure but the one thing we keep going back to is you need to pay yourself first. You need to fit that (retirement investing) into your budget, from the beginning. It’s just inexperience and the need to be educated and to show them how to do it the right way.”


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