How Millennials Are Facing Up to the Retirement Challenge

This post is written by Michelle 

Presently, around half of all the people in the country are worried over their retirement savings. But, what are they doing to resolve that?

Millennials vs Baby Boomers

The Transamerica Center for Retirement Studies has found from its 15th Annual Transamerica Retirement Survey that Millennials have emerged as the super savers when it comes to building up a retirement fund. Around 74% of the Millennials are said to have started raising their nest egg at an exceptional median age of 22. That is some 5 years ahead of Gen Xers and almost 13 years sooner than the baby boomers. This report clearly establishes that all the inspirational financial lessons imparted to this emerging group of the demography have literally paid off.

What could you learn from the survey report?

The survey centered around the retirement habits as well as trends of three groups of people viz., Millennials, Generation X and Baby Boomers. These people are either employed full-time or part-time in a for-profit organization with a manpower of at least 10 people.

When the survey results came in, a stark difference was noted amongst these three groups of people as far as their retirement habits are concerned, especially the older and younger generations. Even though Millennials joined into the active workforce at a time when the Great Recession was at its peak, they are much more likely to recover from those initial hiccups and are confident of retiring comfortably. At least, this is what 68% of Millennials believe in.

It appears that they’re less likely to repeat the pre-retirement goof-ups like their predecessors, as they’ve come prepared after having participated in open discussions regarding saving and retirement.

Catherine Collinson, president of TCRS said in a press release that Millennials have become more focused toward their retirement with a bang. The market study has helped her team find that out of every four people, only three have already discussed their savings, investments and retirement plans, while meeting the obligations of their family and friends. She further added that Millennials are twice as forthcoming about retirement as compared to their parents.

Moreover, a major chunk of the Millennials (almost 81%) are worried about their Social Security and that they predict its death before they reach their retirement. So, to reverse the adverse effects of reduced social welfare benefits provided by the state and federal government, they (the Gen Y) are investing in employer-funded 401(k) or any other suitable retirement plans. It is interesting to know that many of the participants are using professionally managed accounts for better realization of their retirement goals.

However, not everything is amiss with the other two groups, i.e., Generation X and the Baby Boomers. Actually, the stellar performance of the Gen Y is nearly matched by the retirement moves of the Gen X people. This is why they have boosted a similar statistic with approximately 83% being concerned about their Social Security and close to them are 67% Baby Boomers who share the same concern, the survey has revealed.

Truly, mobile accessibility of retirement planning tools/widgets have greatly contributed to the success of the Millennials. Around 71% of the Millennials participating in their employer-sponsored 401(k) or similar plans have found mobile apps useful.

The survey also discovered the need for a well-documented, long-term retirement plan amongst the Millennials. Sadly, just 10% of the survey participants have used either a retirement calculator or a worksheet to draw up a proper retirement savings map. The bottom line here is, Gen Y though they are ahead of the pack in their race to build-up a sturdy nest egg, it is high time that they’ve also paid heed to the bigger picture.

Cut household costs – A stepping stone to bigger task

Ditching certain less-important household costs can be a real boost to your retirement savings. Here’s how:

• Cable TV charges –Like many others, you too must be paying around $100 a month or higher to enjoy the privilege of surfing through your favorite channels. But, calculate the dent it is putting in your pocket. A $100 cable charges a month translates into $1200 a year and multiply that by a 30-year career, you’ll get a whopping figure of 36,000.  So, stop procrastinating and switch over to some other low cost alternatives like Netflix or Hulu. Subscribing for these services would let you to enjoy your favorite shows at a fraction of the cost of cable TV.
• Auto-enroll – Average participation rate in employer-funded retirement plans grew up to 84.6% as compared to 81.4% a year back due to automatic enrollment. Similarly, participation rates dropped due to an absence of the same. Just 62.4% of the employees participated in plans where their employers didn’t enroll them automatically. As a result of the auto-enroll facility, the average plan balance increased by the end of 2013 from $81,240 in 2012 to $91,060, the 2014 Aon Hewitt Universe Benchmark Survey has found. Though the news is quite a welcoming one, yet as per Aon, you’d need retirement assets that are 11 times your salary to maintain the same standard of living after retiring from the workforce.

Just by tweaking some of your household expenses, you get to live a much more comfortable retired life with at least $36,000 more of a nest egg. And if you invest the same amount in plans like an Individual Retirement Account (IRA) or 401(k) with an average 7% return, then you could possibly be richer by around $120,000.