When it comes to saving, although millennials are really pretty savvy about the need to start early in putting money away for retirement, they face some stiff challenges in doing so—such as whether to keep a roof over their heads or put food on the table.
New research from Cerulli finds that low-salary jobs force millennials to choose between immediate needs—buying food or paying their rent—and a goal that's actually decades away, and that distant goal often loses.
While its 2017 survey of 1,000 active 401(k) plan participants show that a majority (85 percent) of participants think people should start saving for retirement before age 28, Cerulli says that only slightly more than half (55 percent) actually did so.
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While it's good news that they want to get a head start, it's bad news that apparently many can't start saving as early as they'd like.
Why didn't they, one might wonder—but the report says they didn't have enough money to get started.
Cerulli analyst Dan Cook says in the report, "For millennials, who are generally at the lower end of the income spectrum and face a host of competing financial priorities, this is often a legitimate reason."
He adds, "Thinking of retirement, which is 30 to 40 years away, in the same light as immediate saving needs such as rent or mortgage and food/groceries is also a challenge for this group."
How to solve this problem? Part of the answer, according to Cerulli research, is the use of automatic enrollment and employer matching contributions by employers; those features, the report says, "are influential factors in getting millennials to begin saving for retirement and increase their contributions."
In fact, 79 percent of participants under age 30 and 70 percent of participants between ages 30 and 39 describe employer matching contributions as "very motivating" to increase their 401(k) contributions. Cook says in the report, "This group of younger investors communicates that, if their employer were to offer greater matching contributions, they would be highly likely to save more for retirement."
And remember, millennials are online divas, savvy enough that they're more likely to plan for retirement online. More than a third (37 percent) of participants under age 30 and 45 percent of participants between ages 30 and 39, according to the report, view online saving tools and services from their 401(k) providers as very helpful for retirement planning.
The percentage of participants who share this view drops substantially as age increases, with just 4 percent of participants over age 70 viewing online tools as very helpful. So while older workers may not be all that interested, offering online planning tools to get younger workers to jump in could make a big difference for their eventual retirements.
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