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Millennials Save for Retirement Years Earlier Than Boomers

by Kim GreeneJune 6, 2022
Millennials Save for Retirement Years Earlier Than Boomers

It appears that all of the marketing urging people to start saving for retirement as early as possible has had some effect. The financial future of millennials was quickly evaluated, and they quickly came to the conclusion that it was gloomy.

According to a new study, members of the "YOLO" generation began putting money into retirement accounts (similar to 401(k)s) nine years sooner than their baby boomer parents did at the same point in their lives.

According to the study "Retirement Reimagined" conducted by Charles Schwab Corporation, one of the factors that are driving millennials to begin saving for retirement on their own is the absence of pension plans, which are programs through which companies would take care of workers once they reach retirement age.

Millennials are, in many ways, in a worse financial position than their parents were, and they are also less likely to own homes, which was a significant source of funds for retirement for boomers.

Many millennials are concerned that they will not be able to retire, despite the fact that they have started saving money at an early age. Furthermore, millennials have a very different understanding of what retirement entails than boomers had.

According to the report, which surveyed 5,000 Americans and used predictive analytics to anticipate retirement outcomes and attitudes by generation, "Millennial retirees will spend 24 percent less time on financial matters than boomers," and they will use their savings to pursue their desired lifestyle and passions.

Generation Gaps in Retirement

Millennials have been quoted as saying that they have recently halted their efforts to save money. According to a survey that was carried out earlier this year by Fidelity Investments, close to half of those between the ages of 18 and 35 are holding off "until things return to normal."

The fact that many younger workers are automatically enrolled in their company's 401(k) plan rather than having to opt into such programs like boomers were required to do means that these workers are likely starting to save for retirement much earlier than boomers did. Auto-escalation clauses are being added to an increasing number of employer retirement plans. These clauses stipulate that participants' contributions, expressed as a percentage of their pre-tax wage, will be automatically increased by one percent per year.

According to the findings of a study conducted by Schwab, millennials who have reached retirement age would have a probability that is more than 150 percent higher than that of boomers to invest in cryptocurrencies and digital assets.

This finding is consistent with the results of an Investopedia survey on financial literacy that was published earlier this month. According to the findings of that survey, which polled 4,000 people in the United States, 28 percent of millennials have the intention of relying on cryptocurrency to support themselves financially in retirement.

According to Rob Williams, managing director of financial planning, retirement income, and wealth management at Charles Schwab Corp., "The good news is that millennials have more time before they retire to take risk." 

"But over time, retirement success comes from tried and true things like diversification, having ownership in the growth of the United States and global economy through traditional stocks — things that have cash flows and generate growth — and right now, cryptocurrency does not qualify as having that."

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