Millennials and Retirement Savings: Surprising Research Findings
Oh, Millennials. The group that some folks love to hate. I mean, what other generation would sue their parents for kicking them out of the house at age 30?
Alas, Millennials (the generation born between 1981 and 1996) sometimes are categorized as being lazy, entitled and selfish or narcissistic. However, a recent study conducted by J.D. Power actually shows that Millennials are better prepared for retirement than the generations preceding them — a reality that could shatter some of those slacker stereotypes.
The J.D. Power 2018 Group Retirement Satisfaction Study showed that Millennials are most likely of all demographic groups to have set specific retirement goals and have the highest amount of savings—relative to age—in group retirement plans.
The study evaluated participant satisfaction with providers of group retirement plans, such as 401(k)s, based on six factors:
- Interaction across live and digital channels
- Investment and service offerings
- Fees and expenses
- Plan features
- Information resources
Some of the key findings of the 2018 study:
- Millennials are most prepared for retirement: Among all generations of group retirement plan members, 51% of Millennials have set specific retirement goals, compared with just 44% among both Gen X and Boomer participants. Of the 51% of Millennials who have set goals, 83% say they believe they are on track to meet them.
- Boomers are missing the mark: Nearly two-thirds (61%) of Millennials have at least $25,000 in total retirement savings, and 27% of them have more than $100,000, with an average of 30-35 years before retirement. By contrast, 75% of Boomers have more than $100,000 in savings with an average of just three years until retirement age. The average Boomer will hit age 65 with just 3.4 years of current income saved, far short of the 10 years some experts recommend.
- Just one-fifth of 401(k) participants plan to roll over to current plan providers: While there is an enormous “money in motion” opportunity looming, just 20% of current group plan participants say they “definitely will” roll over those assets to their current plan provider in the future. However, when plan participants are digitally engaged, aware of guidance and education resources, and experience transparency around fees, the likelihood that they will roll over their assets to their group plan provider increases to 48%.
One reason Millennials may seem better prepared for retirement is the fact that they are waiting much longer to get married and have children than the Boomers did. Many Baby Boomers started families right away, which didn’t allow them to save money for retirement as soon as they might have liked. I’ll be curious to see how long these Millennials savings accounts last after they start having families of their own.
It is also true that many of the younger generations understand that they will not be able to rely on programs like Social Security to assist them in their retirement years. If they want to be able to continue to live an accustomed lifestyle, they will need to prepare for it now. Hopefully, this trend of preparing for retirement will continue though, and we will see a lot more people enjoying their aging years instead of working.
You can view the full study from the JD Power website.