Unlike Boomers, Millennials Appear to Be Super Savers
May 14, 2013
A new study from Merrill Edge shows that Gen Y, defined by the study as those ages 18 to 34, is starting to save for retirement earlier than any other generation. Many are investing by age 22, compared with baby boomers who started on average at age 35, says USA Today.
- The Merrill Edge study of mass-affluent Millennials -- those with $50,000 to $250,000 in assets -- shows that on average the age group has $55,000 saved for retirement, which Merrill Edge director Alok Prasad calls "quite impressive."
- "They are a lot more disciplined, in terms of thinking ahead and being proactive about saving for the future," he says, a mindset formed after living through two economic downturns -- the dot-com bust and Great Recession -- watching their parents struggle financially and then struggling themselves due to high unemployment and economic uncertainty.
The age group is also wary of the long-term viability of Social Security. The survey shows that just under half of Millennials indicated plans to rely on public programs for retirement, down from 63 percent of Millennials who said the same in 2011.
Income has shown to influence 401(k) participation among Millennials, but even lower earners are investing in company plans. A Prudential survey out in December showed that of employees age 21 to 29 who are eligible for company plans, 91 percent will participate if they're making more than $50,000 a year, while 70 percent participate if they're making less than $50,000 a year.
Even Millennials who started saving early, though, have had difficulty staying on track.
- Matt Watson started investing in a 401(k) with a 6 percent company match at a job with an electric company out of college.
- The 26 year old cashed out the roughly $5,000 he had accumulated, though, when he found himself out of work last year.
- It "wasn't smart, but I was desperate," Watson says.
Source: Hadley Malcolm, "Unlike Boomers, Millennials Appear to Be Super Savers," USA Today, May 12, 2013.
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