Millennials – the generation that grew up in the Great Recession – have been doing a better job at saving than many of their older counterparts. More than half are saving at least 5% of their income, a study from Bankrate.com earlier this year.
“Our data shows very clearly that millennials are doing a good job of saving,” says Greg McBride, Bankrate.com’s chief financial analyst. “They are more likely than their counterparts in Gen X to have emergency savings and they are starting to save for retirement at an earlier age.”
But when it comes to saving for retirement, they still may not be doing enough.
A Harris Poll study commissioned by the Million Dollar Round Table found that only 22% of millennials are saving for retirement, yet on average they expect to retire relatively young, at 62. Older generations don’t expect to retire until later.
Many are placing buying a home, advancing in their career and getting married higher on their financial priority list than retirement. While these milestones are important, letting retirement savings fall by the wayside can cause major long-term financial issues.
“The biggest financial regret Americans have is that they didn’t start saving for retirement early enough,” McBride says.
Millennials are also facing another setback to saving for retirement that many previous generations haven’t had: student loans on a massive scale. MDRT’s study found that 33% of millennials had paying off student loans as a priority over the next five years.
“It is not uncommon for me to meet a 28 year old out of medical school who has $400,000 in debt and no savings,” says Brenton Harrison, a member of MDRT and financial adviser for the Henderson Financial Group.
Harrison says the key to helping millennials get past their debt and increase their savings is through education. Right now, many millennials may have limited knowledge on how to plan their finances to ensure that they can reach all of the milestones that they hope to. That’s where employers can help.
“If you’re an employer, take the time to educate employee as if it’s the last time they’re going to hear it,” Harrison says.
Another step employers can take is to automatically enroll their workers in retirement plans when they start on the job.
“If someone starts you on day one, from the very first pay check, you won’t miss it because you never saw it in the first place,” says Jack VanDerhei, a research director for the Employee Benefit Research Institute. “Certainly the best way to help millennials get on track is to sponsor a retirement plan, which will typically be a 401(k), and, if at all possible, make that an auto enrollment with auto escalation.”
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