Millennials are way ahead of their parents in retirement savings 2022-04-27 05:34:45

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Millennials are way ahead of boomers when it comes to saving for retirement, according to A New study by investment firm Charles Schwab. This younger generation is already hoarding money in their mid-twenties, beating their parents by about a decade.

But it’s not all good news. The increased savings may be because millennials have no expectations of receiving employer-sponsored retirement plans upon retirement. In 1981, 84% of full-time workers in large corporations participated in a pension plan; By 2020, that percentage has fallen to just 28%, according to the Bureau of Labor Statistics.

“A lot of Boomers felt their retirement was taken care of for them,” said Angela Montez, a special counsel at the law firm Eversheds Sutherland, where she focuses on retirement policy and investment.

Millennials don’t have that luxury. About 72% of millennials are highly pessimistic about achieving financial security in retirement, compared to 43% of boomers, According to the National Institute for Retirement Security,. Saving at a young age did little to ease retirement anxiety.
This is most likely because Millennials are worse off in almost all aspects of their financial well-being. They graduated from the Great Recession, and dealt with Covid and a second recession when they reached the peak of their earnings potential. Now they are preparing for what financial analysts expect After another recessionthis time combined with levels of inflation not seen in 40 years.
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Millennials today make up the majority of the workforce in the United States, but they represent Only 6% of the family wealth. (Boomers own 50% of the wealth and Generation Xers own 30%.) It’s not unusual for wealth to accumulate in older generations, but in 1989, when baby boomers were about the same age as millennials now, they represented more than 20% Of all the wealth of the family.
Student debts also exploded. Millennials who started college in 2007 I paid an average of $19,400 a year Study, room and board. Boom in first year of college in 1974 I paid about $10,300adjusted for inflation.

Montez said lifestyle goals also play a role in increasing savings. Millennials are more mobile than previous generations, so investing in a home isn’t necessarily a priority, and their money tends to be allocated to 401(k) plans.

About three-quarters of Boomers and Gen Xers expect to own a home in retirement, while less than half of Millennials own. Schwab’s study found that more than 60% of millennials will prioritize travel when they retire.

Millennials also said they will devote less time to managing their finances and investments once they retire, the study found, because they aren’t as focused on continuing to accumulate wealth later in life as Gen Xers and Boomers.

“Millennials don’t view retirement as a target savings number and time, but rather more of a target state of mind or lifestyle,” said Jonathan Craig, Head of Investor Services and Marketing at Charles Schwab.

There is one thing millennials are focusing on: cryptocurrency. Schwab found that about 25% of millennials plan to invest in cryptocurrency, compared to about 5% of boomers.

Asset managers try to adapt to change: Fidelity, the nation’s largest provider of 401(k) plansOn Tuesday, it announced that it will allow its investors to put a portion of their savings into Bitcoin, as long as their employers are on board.

Advisers remain skeptical about such changes.

said Rob Williams, managing director of financial planning, retirement income and wealth management at Schwab. “Currently crypto is not considered ineligible to have it.”

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