More millennials prefer retirement to salary increases
You deserve a raise. You also deserve more retirement security.
If you had to choose between the two, and you're between 18 and 34, odds are you'd trade some of your pay today for greater retirement security in the future, a new survey says.
It seems odd. Aren't young people loaded down with student loans and plagued by expensive housing? Some 65% of millennials surveyed by EY (aka Ernst & Young) and the Economic Innovation Group said "they did not make enough money to cover expenses or are living paycheck to paycheck." And aren't they focused on experiences—and not the experience of living in drudgery while they save all their pennies for old age?
Yes and yes. Still, 60% of those 18 to 34 in a Willis Towers Watson survey of more than 5,000 workers said they would forgo some of their pay if it meant a more secure retirement. That's up from 42%, when the same survey was taken in 2009.
“We’ve been seeing this percentage rise steadily for millennials” since the financial crisis, said Steve Nyce, senior economist at Willis Towers Watson. “They’re struggling with the economic environment they’re in, with having debt levels no other generation really had to deal with, and they’ve recently seen parents near or at retirement go through significant turmoil with the decline of the stock market in 2008-2009."
Trading pay for a more secure retirement is an easy choice to make when it's not a real decision. But it does make some sense, given the sorry state of retirement savings in the U.S. Millennials may be especially anxious since many don't believe Social Security will be around when they need it. A 2014 Pew Research Center Survey found that only 6% of millennials expect current benefits to be there when they hit 67 and would be eligible for full benefits. More than half of those surveyed by Pew think the program won't exist when they head into retirement. Odds are that it will, but with benefits slashed by 25%.
Fear of retiring in penury is a widely shared insecurity. Most baby boomers would make the trade. Some of them will file for Social Security before 2034, when an automatic reduction in benefits kicks in unless the program's funding somehow improves. And some of them have something younger workers can't even dream of getting—a guaranteed pension benefit. But the survey found that 66% of that generation would still trade pay for beefed-up retirement benefits, compared with half who said that in 2009.
Trading pay for more financial security later in life makes even more sense when you consider the growth of the gig economy. Those jobs generally don't come with any, let alone generous retirement benefits. This could change, as Uber's pairing up with robo-adviser Betterment shows. Drivers can sign up for retirement accounts using their Uber app, with no fees for the first year and no minimum starting balance. But Uber hasn't said it will kick in any matching funds, as with a 401(k) retirement savings plan.
While millennials are often portrayed as entitled slackers, many surveys show they are smart about money. And greater retirement security, which lets you enjoy life with less financial anxiety, may be worth it to them, even if it means a slimmer wallet today.