Many Millennials Beating Parents at Retirement Planning

The other key factor was touched on by Farrington: financial advice.

“If you delve into the behaviors we see when we split the responses between those who are advised and those who are not advised, there is a real lesson in there for millennials,” Farrington said. “Millennials that said they have a financial relationship with an advisor are saving at a higher rate—9.5 percent versus 7.8 percent—and are also more likely to have a retirement goal and a plan to march toward that goal.”

Avoiding the Savings Sins of Their Fathers

The good news overall is certainly that millennials are thinking about retirement. Perhaps they have heard plenty of horror stories about their parents’ poor retirement preparedness and they don’t want the same fate. Or maybe they are convinced that Social Security benefits will not be there for them and they need to act sooner rather than later.

“I think this generation is far more use to the idea of having access to a workforce savings plan,” Farrington said. “I think they ask questions about it. I think they’re also showing broadly that they get this idea that a vast majority of their retirement will be predicated on their own savings behavior. They’re less likely to have complete faith in the Social Security system. All of those things are coming into play.”

Don’t underestimate the role of technology, either.

“If they have access to a [savings or investment] plan, they typically will have some basic education and then they have access to a suite of online tools,” Farrington said. “The vast majority of people that responded to our survey will tell you that they had access to tools such as retirement income calculators, personal performance benchmarks, and they’re able to begin down this path at an earlier age.”

The challenge for retirement planners is to convince millennials that aren’t already saving for retirement, to start doing so, and to make it an automatic process.

“When I get in front of a millennial I try to impress on them as much as I can how easy it is if they start with even a modest amount and get used to doing it,” Sollinger said. “Once it becomes a habit they don’t even think about it.”

“I would try to impress on them how simple it is and how easy it is to accumulate wealth by starting small,” Sollinger said. “You liken it to something they buy every day, like a Starbuck’s coffee or a dinner out. Couch it in terms like that. Try to make them understand how simple it is [to save] if they start now as opposed to waiting 10 years. You can say, ‘look you can have $700,000 by the time you turn 60 just by saving $50 per month.”

Finally, retirement planners should impress upon young clients that the future is a complete unknown. Both Farrington and Solinger stress that many people are forced to retire early due to health or other issues, and aren’t able to save for as long as they expected.

Farrington’s advice to his young clients: “Recognize what are likely to be significant financial events in your life and do as much as you can to plan for them, so that those events don’t derail your retirement savings. So if you’re early 20s, perhaps you have marriage and homes and children ahead of you. Begin accounting for that as soon as you can so that your behavior in terms of saving for a much longer term goal doesn’t suffer.”