Millennial Parents Saving More for Retirement Than Older Generations. It may surprise you — millennials with children are on pace to be wealthier in retirement than the average Gen-X or Baby Boomer parent.
So says a Business Insider article citing a new study from Nerd Wallet, which found that working Millennial parents (age 18-34) are socking away a median 10% of their income for retirement. And one-third of Millennials are saving as much as 15% of their pay.
By comparison, Gen-Xers (age 35-54) are saving 8% of their earnings, while employed Baby Boomers (55 and older) are setting aside only 5%.
NerdWallet surveyed 2,000 American adults, including 1,112 with children and 874 without. Eighty-four percent of parents said they were saving for retirement, compared with 69% of non-parents. So it appears that although raising a child is costly, it isn’t a deterrent for millennial parents striving for a financially secure retirement.
Employers may have preconceived notions that Millennials aren’t interested in saving for retirement, or that they’re harder to convince that it’s important to do so because they have other, more pressing financial priorities, like paying off student loans or credit card debt. But it appears nothing could be further from the truth. The Millennial generation is taking advantage of opportunities to save early and often, using the fact that time is on their side to build and grow their wealth for retirement.
The chart below, from NerdWallet, shows the retirement savings rates of Millennials, Gen-Xers, and Baby Boomers. For illustration purposes, all generations began saving at age 26 and retire at age 67, earn an average annual return of 6% on their investments, and receive 2% annual salary increases.
Many Millennials are using tried and true tactics to set aside more money for their post-career years — save more when they get a raise and/or when a debt is paid off and cut back on dining out.
What’s more, auto-enrollment is likely having an impact on Millennials’ savings behaviors. Many are starting jobs where they’re auto-enrolled in the retirement plan, and they don’t opt out. While their savings may be unintentional, they are still building a nest egg for retirement — a positive behavior whether it’s voluntary or by default.
It’s encouraging to see that Millennials — especially those with children — are saving prolifically and that they’re on track to retire wealthier than their Gen-X or Boomer counterparts. That said, America’s workforce as a whole is still woefully under-saved for retirement. Plan sponsors can help move the needle in a positive direction for employees of all generations by continuing to implement thoughtful, strategic retirement plan education and communication programs that encourage financial literacy and well being, and that convey the importance of maximizing the benefits of workplace retirement plans, including employer matching contributions and tax-deferred savings and investment earnings.
