Several studies in the past year find that Millennials, have been lagging behind their Gen X counterparts when it comes to retirement planning.
When it comes to retirement planning, Millennials have been given the rap of being a generation of Scarlett O’Haras, opting not to plan for their financial future today, but instead to think about that tomorrow. But Millennials as well as Gen Xers are taking a more proactive role in their retirement planning, according to recent data released by MassMutural life insurance.
Fourth quarter 2013 data for defined contribution plans such as 401(k)s administered by the company show that 58.4 percent of total DC participants are Millennials and Gen Xers. For last year, the percentage of combined assets controlled by Millennials and Gen Xers (34.2 percent) lags behind that of Baby Boomers (60.2 percent), but that gap is closing, MassMutual reports. At year-end 2012, Millennials/Gen Xers held nearly 32 percent of defined contribution assets compared to Baby Boomers at 60 percent.
This is a positive trend, as several studies in the past year find that Millennials, especially, have been lagging behind their Gen X counterparts when it comes to retirement planning. The 2013 retirement Confidence Survey released by the Employee Benefit Research Institute found that about a third (32 percent) of workers ages 25-34 had tried to calculate how much money they will need to save for retirement. This is down from 42 percent in 2013.
Meanwhile, almost half of Gen X workers (47 percent) reported calculating how much money they will need to save for retirement, up from 44 percent a decade earlier. In comparison, more than half of Baby Boomers said they had tried retirement income calculations, up from four-in-ten in 2003.
Across all age groups, EBRI found there is a growing mindset that they will be retiring later. In 2003, 28 percent of Millennials said they expected to retire at age 65. That percentage edged up to 31 last year. Similarly, 19 percent of Gen Xers in 2003 said they planned to retire at age 66 or older. Last year, almost twice that amount (36 percent) expressed that attitude.
Another 2013 survey found that Millennials were saving earlier and making plans now to achieve their retirement financial and lifestyle goals. The Bank of America Merrill Edge Report found that 42 percent of Millennials were starting to save for retirement, on average, at the age of 22. This was earlier than Baby Boomers, who said they started saving on average at the age of 33.
A 2013 Transamerica Center for Retirement Studies retirement readiness report also found a commendable forward-thinking attitude toward retirement planning among Millennials.
This, along with the fact that time is on their side, may account for an optimistic attitude toward their retirement. Seven-in-ten Millennials with a net worth of at least $1 million fully expect to have sufficient income to live comfortably during retirement, according to Spectrem’s Millionaire Corner research. Of those with less than $1 million net worth, 54 percent have similar expectations.
Gen Xers were hit the hardest by the economic collapse, but they, too, feel that time is also on their side. Nearly eight-in-10 (79 percent) of Millionaire Gen Xers fully expect to have sufficient retirement income, as do 54 percent of non-Millionaire Gen Xers.
Their recent pro-active approach to retirement planning and saving is reflected in their heightened concerns over retirement issues, Millionaire Corner research finds. In a 2013 wealth level study of households with at least $1 million net worth (not including primary residence), 44 percent of respondents said they were concerned about being able to retire when they want to. In comparison, 54 percent of those under the age of 44 and 60 percent of those between the ages of 45-54 expressed this concern.
These concerns may be well-founded. A Fidelity study released last December found that Baby Boomers on average are on track to reach 81 percent of their retirement income needs, while Gen Xers are expected to reach 71 percent. Millennials are projected to reach 62 percent of their retirement income needs.
Accordingly, the youngest respondents to Millionaire Corner’s study were more concerned than their older counterparts about getting adequate help and advice that would allow them to reach their financial goals (38 percent vs. 30 percent of Gen Xers). That expert advice may be the reality check to achieve those goals. The highest percentage of respondents under the age of 45 (37 percent) said they expect to retire before they are 60.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.