Failure(s) to Communicate

There’s an oft-repeated line from that 1967 classic movie “Cool Hand Luke” about a “failure to communicate.”

Now, most of us aren’t trying to convey the consequences of violating prison rules, but there are messages where mere words sometimes fall short of their purpose. There are literal barriers in terms of language, of course—but all too often also barriers built of different life experiences, of cultural references, and certainly of age. Indeed, we frequently use words, or employ metaphors to enhance, or at least provide some flavor to our explanations/instructions—only to have it fall on ears that may hear the words, but lack—or in some cases, confuse—the necessary context (I’m routinely forced to reference the Urban Dictionary to make sure certain words haven’t taken on an unintended meaning).   

Mind ‘Set’

In that spirit, several years back I stumbled across something called the Beloit College Mindset List (a couple of years back it “moved” and was rebranded as the Marist Mindset List). It was a list developed to help college faculty be aware of dated references—to help assure better communications with the incoming class of college freshman. In fact, the focus of the list (and it dates back to 1998) was to provide some perspective on the shifting generational perspectives—the mindset, if you will—of individuals just entering college.

I remember fondly the “can you believe it?” water cooler chats about some of the items on previous lists—kids entering college that had never actually seen a floppy disk (which, ironically, lives on in that “save” icon in Microsoft applications), who might have wondered what “cc” actually stands for in their email (because they have never actually had to deal with a “carbon copy”), who never had to dial a rotary phone, who might never have seen (much less used) a payphone, who never knew a world without the “world wide web” (much less a world in which you could connect to it—wirelessly)—and perhaps most notably of late, weren’t even alive on 9/11. Yes, we’re talking about a generation who can’t fully appreciate just how weird it seems to see people having video calls on their wristwatches—just like Dick Tracy did in comics of old (talk about your dated references!).  

Class of 2027

But, according to this year’s Marist Mindset List,[1] the Class of 2027:

• Are just as likely to be listening to Led Zeppelin as Lana del Rey or Lil’ Baby on their phones (with access to music services like Pandora launched in 2005, the year many of these future graduates were born).
• Will get their news primarily from social media sites like YouTube, Instagram and TikTok (Dan Rather & Ted Koppel both retired in 2005, “effectively ending the reign of network news programs as the primary way younger Americans get their news”).
• Have always lived in a world visibly affected by climate change (harkening back to Hurricane Katrina and Rita—though they wouldn’t be old enough to remember either).
• Will almost exclusively watch their video content on YouTube (which launched in 2005) and similar sites online.
• Will be the first to fully integrate ChatGPT or “Generative Pre-trained Transformer” into their college learning experience (one can’t help but see “fully integrate” as a disarming euphemism for more insidious applications).
• Often quote the TV show “The Office,” although the program ended its run in 2013. The characters are omnipresent in today's college culture and the show is now a cultural phenomenon thanks to its rebirth via Netflix and short-form streaming services (OK—I don’t get the fixation on The Office, either. But who am I to question generational fixations?)
  

Retirement (Re)Set

That said, for those of us who will be working (or living) with the Class of 2027 (once they graduate, if not sooner), well, for them (and those working with them), it might be good to keep in mind:

• There have always been 401(k)s (even if everyone hasn’t had access to them at work).
• They may never have to actually sign up for their 401(k) (thanks to automatic enrollment).
• They may never have had to think about the investments in their 401(k) (due to QDIA/target-date fund defaults).
• There has always been a Roth option available to them, whether 401(k), 403(b) or IRA (and, considering what future tax rates are likely to be, they should take advantage).
• They’ve always been able to view and transfer their balances online and on a daily basis (and so, of course, they mostly won’t).
• They’ve always worried that Social Security wouldn’t be available to pay benefits. (In that, they’re much like their parents at their age…even today).

But perhaps most importantly, they’ll have the advantage of time, a full career to save and build, to save at higher rates, and to invest more efficiently and effectively—and, with luck, access to a trusted advisor to answer their questions along the way...

  - Nevin E. Adams, JD

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[1] Sadly, this year’s list isn’t quite as much “fun” as previous lists have been (at least not to this Boomer)—and this year it comes with some political “commentary” that seems unnecessary (at least to this Boomer). The Marist crowd appears to take themselves more seriously than the Beloit College founders did (or perhaps it’s just the times we’re in).

Different Mindsets

Last week Beloit College released the Beloit College Mindset List, as it has each August since 1998. Originally created as a reminder to faculty to be aware of dated references, the list provides a “look at the cultural touchstones that shape the lives of students entering college.”

For example, this year’s freshman class, born in 1994, have never known a time when history didn’t have its own channel, when there were tan M&Ms (or when there weren’t blue ones), or when “It’s A Wonderful Life” was shown more than twice during the holidays. They grew up talking about “who shot Mr. Burns?” not “Who Shot J.R.?” and while for them there’s always been an NFL franchise in Jacksonville, they’ve never known one in Los Angeles. That floppy disk icon for “save” in the word processing document is as anachronistic to them as the “CC” reference to “carbon copy” likely was to their parents’ email. And, perhaps most significantly, they have never lived in a world without the World Wide Web.¹

Despite those differences, the class of 2016 will one day soon be faced with the same challenges of preparing for retirement as the rest of us. They’ll have to work through how much to save, how to invest those savings, what role Social Security will play, and—eventually—how and how fast to draw down those savings.

Those fortunate enough to have access to a work place retirement savings plan at least stand to have some advantages their parents didn’t. They’ll have a better shot at joining those programs immediately, rather than waiting a year, as was once the norm. There’s a growing chance that they will be enrolled in those plans automatically,¹and with the option to increase that initial contribution automatically as well. The expanding availability of qualified default investment alternatives, like target-date funds, should make their investment choices easier and better diversified, and some will likely benefit from the counsel of a growing number of expert advisors. As for help in figuring out how best to draw down those savings in retirement, more choices and alternatives come to market every year.

However, they also have another big advantage (and one that helps make all those other advantages all the better): They’ll have the advantage of time, a full career to save and build, to save at better rates, to invest more efficiently and effectively.

It’s more than just a shift in mindset—and it could give retirement saving a whole new perspective.

- Nevin E. Adams, JD

¹ The full 2016 Mindset List (and links to prior years’ lists) is online here.

² EBRI has recently quantified the impact of eligibility for participation in a 401(k) plan on retirement readiness for Gen Xers. See this report online here. See also “Retirement Income Adequacy for Boomers and Gen Xers: Evidence from the 2012 EBRI Retirement Security Projection Model,” online here.