Millennials Give Saving a Low Priority
Large minorities of the 22- to 37-year-olds who responded to a recent LendEdu survey said their retirement saving every month amounts to less than they spend on various categories of consumer goods. Nearly half of them report they spend more on dining out than on retirement saving. Almost one in three spend more on alcohol or new clothes, and one in four spend more on streaming services such as Netflix and Spotify. What that indicates is that a lot of them aren’t saving very much.
It might seem unfair that saving for retirement is such an urgent matter for someone not yet out of their 30s. After all, they aren’t earning very much yet, are managing household expenses for the first time, and might have a big student loan payment.
But the reality today is that Millennials were not lucky like some of their parents born into a world where they had a decent shot at a job with a pension. And a Social Security check alone is definitely not enough for a retiree to live on.
More and more employers are countering a reluctance to save by automatically signing workers up for the company retirement plan – nearly 50 percent of employers are doing this, compared with just 20 percent a decade ago, according to Vanguard’s client data. The idea behind automatic enrollment is that, just as inertia prevents people from signing up for a 401(k), inertia will keep them in the plan if the employer puts them there.
The strategy seems to be working: 92 percent of workers in their mid-20s to mid-30s whose employers have auto-enrollment are contributing part of their paychecks to their 401(k) plans, according to Vanguard. Contrast that to just 52 percent of workers in this age group whose employer plans are voluntary.
There’s nothing better than to be young and carefree, but the young adults who aren’t saving are already putting their well-being in old age at risk.
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