The cliché about millennials is that they’re irresponsible and coddled, a load of adolescents who need lessons on acting like an adult. Millennials turn out to be far more responsible than their parents or grandparents, however, when it comes to one sober, sensible and not-the-slightest-bit-sexy topic: saving for retirement.
Millennials are starting to save earlier than any generation that has come before them. In 2014, the Transamerica Center surveyed over 4,000 workers online and found that the median age when millennials started saving for retirement was 22. In comparison, Generation X didn’t start saving until 27 and the Baby Boomers waited until they were already 35.
The report defined millennials as people born between 1979 and 1996, while Gen Xers were born between 1965 to 1978 and Boomers between 1946 and 1964.
“We’re advising younger and younger investors, people who are becoming more aware of what they need to do…to accomplish their life’s financial goals and responsibilities,” said Richard Massaux, Managing Director of Investments for Wells Fargo in Philadelphia.
Not only that, but the Transamerica report found that millennials were twice as likely as Baby Boomers to “frequently” discuss the topics of retirement, savings and investment (18 percent versus 9 percent), even though Boomers are the ones who are actually looking retirement in the face.
Another survey, from the Consumer Federation of America, found that 56 percent of 18- to 34-year-olds reported saving at least five percent of their income, the most of any age group surveyed.
One big reason that millennials are more likely to discuss retirement is that they need to rely on their own savings more than previous generations. 81 percent of millennial workers told surveyors that they don’t expect Social Security to support them, and 70 percent are already saving their money in 401(k)s or other employer-sponsored plans.
“There’s no such thing as a pension anymore,” said Massaux. “…They really have put the onus on the individual to handle their retirement and savings.”
Millennials also have more money to save in the first place because they’re waiting longer to buy a house or start a family. Changing social mores are part of the reason for this trend, but also the fact that buying a home is so expensive, especially for young people in big cities.
“The American dream doesn’t seem so handed to you as it did decades before,” said Massaux.
A SmartAsset study, for example, found that the average millennial in Philly can afford to buy a house…if it’s less than 500 square feet.
Finally, millennials came of age during the Great Recession, when many retirees saw decades of savings spin down the drain. Massaux, a member of Generation X, admitted that younger folks were learning from his generation’s mistakes.
"We destroyed you,” he said. “We screwed this country up so bad that you are forced to be scared into saving more.”
That being said, here’s his advice for millennial savers now:
•Identify your short- and long-term needs and goals. The CFA survey found that 18- to 34-year-olds, despite claiming to save more than any other age group, were the least likely to report that they had “a savings plan with specific goals.”
•Find out what options your employer has for saving plans. Take advantage of anything that can be saved before taxes, or plans that saves a portion of your paycheck automatically so you don’t have to think about it.
•If your student loan debt is more than twice your annual income, focus on paying that off. If you have a more manageable amount of debt, however, then you should try to both pay off debt and put money into savings.
Massaux holds hope, in the end, that the next generation is showing initiative and investing early.
“It’s refreshing to see that maybe they are just a little more intelligent because of the lessons learned,” he said.