Millennial Incongruity on Importance of Saving vs. Action

Millennials grasp the importance of saving for retirement, but that doesn’t necessarily translate to action which applies that understanding, says a recent white paper.

 

In “Millennials & Retirement 2020,” the Insured Retirement Institute (IRI) lauds Millennials’ appreciation for the need to save for retirement. “Millennials, perhaps more than any other generation, understand that a prosperous and secure retirement is largely up to them,” it says.

But that understanding, they say, does not necessarily lead to action. It says that while Millennials outstrip other generations regarding saving at least something, and also are “far less likely” to regard Social Security as a major income source during retirement, nearly half of them have saved less than $10,000 so far — and only 39% contribute to a 401(k), IRA or other qualified plan. The implication of that, the paper argues, is that a relatively high number of Millennials either are either no longer saving or are saving for retirement in other ways.

 

 

There is more to the white paper’s findings regarding Millennials’ attitudes toward saving and the way they apply them than first impressions. For instance, Millennials are open to annuities and guaranteed lifetime income.

 

The fact that a significant percentage of Millennials have not saved much money yet is mitigated by a number of factors, the paper argues. For instance, they have a longer amount of time in which to save than their older counterparts. “Even the oldest Millennials have 25 or more years to build their nest eggs,” it notes, and, “The youngest Millennials have time on their side, and many would find that a modest increase in saving — or getting started at a manageable level — will help them avoid the need to save at an unrealistic level later in their working lives.”

 

 

The paper says that Millennials have much the same view as older generations: Most of them expect to reach a point at which they can choose how much they want to work or become sufficiently financially secure to not need to work again. But that expectation doesn’t necessarily mean they expect smooth sailing. The paper says that while most Millennials expect to be able to retire, many still worry about financial security during retirement — to the tune of more than 50%.
And not all have a rosy view. The paper says that 16% of Millennials believe they probably never will be able to retire.

 

 

The report shows that those with lower yearly earnings have lower saving levels, while those with higher incomes have better savings rates and a greater interest in saving, indicating that education can have a positive effect on saving behavior.

 

According to the paper, one reason why some Millennials are not saving is that they do not have a plan. Another major factor is a desire to satisfy debt. It suggests that financial advice could help address those impediments to saving for retirement.

 

The paper also suggests that Millennials should review their projected Social Security benefits and create an account on the Social Security website, where they can access information and tools that will enable them to better project their benefits.

 

“Increasing savings today and having a plan for how to use savings during retirement can help Millennials achieve the retirement they want, but balancing retirement saving against other priorities – paying off debt, raising families, and providing financial support to aging parents – will be quite challenging,” the paper says.