Last reviewed February 27, 2020
Millennials have infiltrated the workplace and bring expertise in social media, individuality, technology and hipster bars. But, what do they know about saving for retirement?
Typically, younger people don’t make retirement savings a priority. Living expenses, student debt, rent or house payments, and other day-to-day expenses mean that retirement savings take a back seat. In fact, a Franklin Templeton Investments survey from January 2016 says that 40 percent of millennials don’t have a retirement plan in place, and 57 percent haven’t started saving.1 That attitude, however, will make it much more difficult to have a secure retirement later, according to seasoned retirement plan advisors.
The main thing that millennials are sacrificing by not saving now is time. Time allows funds to grow through compounding, and that can turn relatively modest savings into much larger nest eggs. For example, saving $50 each month in a retirement account earning 6.5 percent annually and compounded monthly would generate retirement savings of $226,781 over 50 years. A millennial who starts saving the same amount 30 years later, allowing it to only compound for 20 years, would have only $24,525 at the end of the 20 years.2
One common objection millennials have about contributing to an employer-sponsored retirement plan is that they may not stay with that employer. Very few people stay with a single employer for their entire careers, and they should be reminded that retirement plan funds can be rolled over into a new employer’s plan or rolled over into an IRA, if they leave their job.
Last reviewed 6/1/2022
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