Despite what the media may be telling you, millennials are the generation to keep up with when it comes to preparing for retirement. While the millennial generation (those born between 1981 and 1996) are often stereotyped for laziness or lack of work ethic, studies prove quite the opposite. With 80 million millennials in the U.S., they comprise most of the American workforce. In addition to being the largest share of our country’s workforce, this generation puts aside money and takes retirement very seriously. Growing up with the internet at their fingertips has proven not to be a hindrance but rather the source from which they learn and develop their skills. It might just be the cynical talk about their generation that propels them forward in their work, lifestyle, and retirement planning.
Millennials vs. Baby Boomers on Retirement Contribution
Some common characteristics of the baby boomer generation (those born between 1946 and 1964) include a strong work ethic, a goal-centric attitude, resourceful nature, and discipline — all of which have been proven by their hard work and life experiences. While millennials and baby boomers may have different work ethic descriptions, each generation works hard and puts money away for retirement. But here are some facts that may surprise you. According to the 2016 Wells Fargo Millennial Study, the average age at which millennials make their first contribution to a workplace retirement plan is 24, compared to nearly 33 for baby boomers. When it comes to putting away money for a retirement plan, 59% of millennials make this a priority. Also, half of the millennial generation is saving about 6% or more of their income. The J.D. Power 2018 Group Retirement Satisfaction Study states that the average baby boomer will hit age 65 with just 3.4 years of current income saved, far short of the ten years some experts recommend. The millennials are doing it right: the earlier you start putting money into retirement, the better off you will be in retirement.
Millennials vs. Generation X on Social Security
While Social Security is a common principle of putting away retirement money, it is not always the most trusted form of retirement planning. According to Investopedia, “Social Security was never designed to be a full pension. It was supposed to replace only about 40 percent of the average worker’s pre-retirement income.” What makes the way millennials save different from other generations? Their lack of trust in Social Security alone to pay for their retirement. Over half of this generations’ retirement fund comes from self-funding, 401(k), or an individual retirement account. Generation X (those born between 1965 and 1980) also has an uneasy feeling about putting their trust in Social Security alone. But unlike millennials, Generation X doesn’t care as much to act on it right away. While 40% of the millennial generation is increasing their 401(k) investment, only 30% of Generation X contributes to their 401(k). Some sources indicate that seven out of ten Generation X people feel that they could work until the age of 65 and still not have enough money to retire comfortably and meet their needs. So, what does this mean for each generation? Saving for your retirement needs to start as soon as possible.
No matter what generation you were born in, you will feel the necessary pressure to put money into your retirement fund. If you genuinely want the kick-back lifestyle at 65 years of age, you need to consider your investments and savings. Numerous sources indicate that 76% of all three generations believe that their generation will have a much harder time achieving financial security in retirement compared with their parents’ generation. No wonder millennials are placing so much of their income into retirement funds!
The idea of having to set up your retirement plan can seem daunting at times. But it doesn’t have to be complicated. With the right help and tools, you can feel confident about your retirement. The Retirement Industry Trust Association (RITA) is here to provide you will all the help you need in securing your retirement plan. RITA’s vision is to be the leading educator and advocate for the self-directed retirement plan industry’s growth and best practices. We encourage you to start investing now so you can enjoy the lifestyle you envision when you are retired. For more information about RITA’s services, click here.