Two-thirds of millennials have saved absolutely nothing for retirement
- Most U.S. millennials aren't saving for retirement, and those who are saving (only 5%) are falling short of the mark, according to a new report from the National Institute on Retirement Security (NIRS).
- The study, "Millennials and Retirement: Already Falling Short," found that 66.2% of employed millennials have nothing saved for retirement, and only 34.3% of them participate in their employer's retirement plan. A majority (83%) of working Latino millennials don't have retirement savings, with only 22.5% of millennial Latinas and 19.1% of millennial Latinos participating in their employer's plan.
- By contrast, the highest employer-sponsored retirement plan participation rate among millennial demographic segments is Asian men (41.4%) and White women (40.3%). The study cites a number of causes for the savings shortfalls, from years of stagnant wages to millennials' ineligibility to participate in employer-sponsored plans. NIRS defined "millennials" as those individuals born between 1981 and 1991.
Members of previous generations were (and to an extent, still are) caught up in employers' transition from offering defined benefits plans, including fixed pensions, to providing defined contribution plans like the 401k.
Consequently, these generations were less prepared for the higher degree of active investing that accompanied that change. Millennials, on the other hand, generally enter the workplace with 401ks already in place in many organizations. That said, these plans are out of reach for the majority of millennials. Auto-enrollment could help to solve some of these headaches, but many employers, particularly smaller firms, have complained about higher costs.
The charge for employers is to promote retirement savings plans to eligible millennials and emphasize the importance of saving for their post-working years, when the cost of living will be higher and Social Security benefits could meet few of their needs.
By some reports, millennials are more receptive to retirement savings instruction and investment advice than boomers. This should be an incentive for employers to step up their efforts to sell millennials on saving more for retirement.
- National Institute on Retirement Security Millennials and Retirement: Already Falling Short
- HR Dive More employers are offering auto-enrollment 401k plans to encourage saving
- HR Dive Changes, trends and best practices for 401k administration in 2018