According to new research from the Principal Financial Group, the majority of Millennials are starting early when saving for retirement, but most aren’t saving enough now in
order to enjoy a comfortable retirement later. 63% report they started saving for retirement before age 25. But less than a third are saving at least 10% of their salary through their
employer-sponsored retirement plan.
Among US Internet users ages 25 to 35 polled in December 2014 by Principal Financial Group, 70% said having financial security was their
top goal, and six in 10 were also focused on making a comfortable salary, reported Marketing Charts.
Jerry Patterson, senior vice president of retirement and investor
services at The Principal, says “… just as important as saving early is saving enough… (analysis) found that saving 10% of salary, plus employer match… over working
career… is the key to achieving a more secure retirement… ”
According to the survey, 83% of Millennials take full advantage of matching
contributions when offered through their employer-sponsored retirement plan.
Patterson agreed that “ … the employer match is a valuable and important incentive
to get Millennials saving… but the amount of the match is not a signal to stop saving… most matching formulas phase out once an employee reaches a savings level of 3 or 4% of pay…
well short of the 10% experts indicate they should be saving… ”
66% of Millennials have established a monthly budget, says the report, and 35% use a
digital-budgeting system. 57% of Millennials have an emergency savings fund, but only 32% believe their fund could cover basic monthly expenses for more than six months. Millennials see large
expenses, especially student loans and other debt, as primary obstacles to saving anything for retirement.
Saving for retirement competes with many big-budget items for
Millennials, their three largest budget items, the top answers were:
- Mortgage/rent (65%)
- Food (38%)
- Car/transportation (30%)
- Basic expenses
(27%)
- Student loans (20%)
- Credit card debt (16%)
84% of Millennials felt that a young adult should be financially independent by age 25 or
younger. And six of 10 Millennials expect to be better off financially than their parents. Some Millennials, though, report their parents are still footing the bill for various expenses, including
their cell phone bills (12%), car insurance (8%), health insurance (7%) and rent/mortgage (7%).
Just one-quarter of Millennials surveyed by Principal Financial Group were
working with financial professionals to manage their finances. Among those who didn’t, 41% said not having enough money saved to meet with a financial professional was the top reason for not
working with a professional.
U.S. Millennial Users Not Working With
Financial Professionals (% of Respondents) |
Reason For No Professional Help | % of Respondents |
Don’t have enough money saved | 41% |
Haven’t taken time to find one | 38 |
Don’t want to pay fee for advice | 36 |
Don’t think I can afford it | 25 |
Unsure how to find professional | 20 |
Prefer to do it myself | 18 |
Rely on family, friends
and co-workers for advice | 13 |
Financial pros too expensive for
services provided | 12 |
Not interested in the products offered | 11 |
Don’t trust them | 7 |
Have not found pro that I relate to | 7 |
Not old enough to work with professional | 5 |
Source: Principal Financial Group, March 2015 |
Patterson
concluded by saying that “… most millennials… haven’t done the math to determine what level of savings they should be targeting… (but) all agreed that they
weren’t doing enough… “
For more research, analysis and insights
from The Principal, please visit here.