The real reason many millennials aren’t saving for retirement
Millennials are oft-maligned as a flighty, entitled generation saddled with debt and too obsessed with food and travel to worry about saving for retirement. But that doesn’t match the reality.
Young people are just as likely — or even more likely — than other generations to sock their money away. And new research points to one major reason more 20- and 30-somethings aren’t creating a nest egg, even if they might want to.
Their employer doesn’t offer a workplace retirement plan.
Just 43% of millennials without an employer-sponsored retirement plan say they’re saving money consistently, according to a poll of 800 18-to-34-year-old voters released Wednesday by Young Invincibles, or YI, a millennial advocacy group. That’s compared with roughly three-quarters of millennials with a 401(k) or other employment-sponsored retirement plan, who are consistently saving, the poll found.
In other words, a millennial’s propensity to save may have more to do with his job status than his personality. This is particularly troubling given that past YI research indicates that the bulk of 18- to 24-year-olds work in sectors like retail and hospitality that don’t typically provide benefits to their lowest level workers, said Colin Seeberger, YI’s strategic campaign adviser.
“Millennials really do want to save,” he said. “We should be doing everything in our power to empower more young workers to be able to do the saving that is going to be so important to their financial futures.”
In the report, YI highlights one possible way to help more young adults save: state-sponsored retirement plans, which a handful of states have already adopted. By way of example, Illinois’ program, which will take effect in 2017, works like employer-sponsored retirement plans — with contributions automatically deducted from workers’ paychecks — but workers can easily take the benefit from job to job. Most state-sponsored plans don’t match contributions, a typical benefit of an employer-sponsored retirement program.
Still, these types of programs have broad-based appeal among young voters, YI found. Nearly 80% of millennial republicans, 85% of millennial independents and nearly 90% of millennial democrats said they would support a state-sponsored retirement programs.
Increasing access to higher education through initiatives like free community college could also help more millennials save for retirement, Seeberger said. Young adults with more education are more likely to have access to employer-sponsored retirement programs, the poll found.
In the meantime, millennials with federal student loans who are hoping to save more for retirement should investigate their repayment options, Seeburger said. In some cases, they may qualify for programs that allow them to pay less money per month and they could put the savings toward their nest egg.
Young people without access to an employer-sponsored retirement plan can also turn to myRA, a “starter” retirement savings program launched by the federal government last year.