To read the headlines, it might be tempting to think that all millennials will be in big financial trouble when it comes to retirement.
For many that may eventually prove true. But there are also a growing percentage of millennial workers giving early thought to their golden years, investing in 401(k) plans at maximum ability, and even seeking out financial planning advice.
To be fair, that financial advice may come in the form of a “robo advisor.” Still, they are getting more investment and financial advice at an earlier age than their parents did. As a result, many millennials already look much better on paper than Generation Xers do when it comes to retirement savings.
“There are some encouraging signs that millennials are saving at an appropriate rate,” said Ed Farrington, executive vice president, Retirement and Business Development at Natixis, which recently published the results of its Global Retirement Security Index.
Natixis surveyed approximately 1,000 individuals for its recent study, including pre-retirees, Gen-Xers, and millennials. As part of the survey, individuals were asked the open-ended question, “How much do you think you’ll need when you retire to live comfortably?”
Looking at the responses of millennials, “They have a self-stated goal on average of about $822,000. They have already on average saved $91,000 toward that goal,” Farrington said.
The gap between $91,000 and $822,000 is certainly large. But Farrington stresses that millennials have plenty of years ahead to close it, and the fact that many have started is very encouraging.
“They are 11 percent of the way there, and they still have anywhere from 30 to 40 years left of savings. So – it’s a pretty good start,” Farrington said. “This generation does seem to be more aware and engaged. I would put them well ahead of where their Gen-X counterparts are today.”
What’s Up With Millennials and Finances?
The Natixis findings might seem to contradict some other recent research. One study pointed out that many millennials jump from job to job in an effort to further their careers, but in the process lose out in investments into their 401(k) plan.
Another recent study concluded that financial savvy is eroding among many college age and young working professionals. Among the findings: College students in 2015 are likely to have multiple credit cards and carry larger credit card balances then two years ago (when the study was last conducted). They are less likely to pay their bills on time or follow a budget. And they are less likely to review their billing accounts or credit history.
So what is going on here?
“I think it’s pretty standard that someone just starting their career has so many other things on their plate that they give retirement planning short service,” said Travis Sollinger, director of financial planning at Fort Pitt Capital Group in Pittsburgh. “It’s one of the last items on their list of the things they want to spend money on. Which is a real shame. The young are the ones that can take full advantage that they have a long time until retirement.”