Whether it’s growing up seeing the family struggle through the financial crisis, or how millennials are graduating college carrying more student loan debt than ever (probably both!), millennials (who are contributing to a 401k plan) as a group are so far showing better financial habits than baby boomers when it comes to saving in their 401k. T. Rowe Price recently released a fun quiz titled “Do You Act Your (Savings) Age?” based on a survey they conducted with more than 2,000 participants with 401ks* that uncovered differences between how the generations are going about building their path towards financial freedom.
I found it encouraging that millennials in this study are far more used to tracking their expenses than baby boomers (75% vs 64%) and thus, the younger generation is better able to stick to a budget (67% vs 55%). Of course, some of these differences can be accounted by their respective stages in life. This translates nicely to the millennials saving almost as much of their salary as baby boomers for their retirement. Though the 8% average (6% median) of salary the millennials are saving is still far too low for a comfortable retirement, it’s a great start and definitely much better than the baby boomers just saving an average of 9% (median 8%) of their income. Remember, baby boomers have a far higher salary because they’ve been climbing that corporate ladder for that much longer and theoretically should be able to save a ton more. And plus, baby boomers simply have less time to allow compounding to work its magic.
And the news gets even more encouraging, because more than half (60% to be exact) of millennials said they would increase their 401k contribution percentage if they get a raise versus only 40% of baby boomers.
Is Social Security Going to Help Me?
I wonder how much of this motivation to save is due to the fact that millennials think social security won’t be around for them. The survey points out that 60% of millennials believe Social Security will go bankrupt before they retire. Now I don’t want to kill the fire to save for the future by saying this, but there is actually little chance the government will let Social Security end – the entitlement program is just too popular with voters. Yes, the program needs a makeover, but people who’ve studied the numbers believe that the program can be put back on a self-sustaining path by making relatively minor adjustments. For the young folks who are reading this – don’t worry, those who really need the program to survive will still get benefits far into the future.
How About You?
Don’t you want to know if you are generally saving like your age group? Call me nosy, but I’m always curious to know how I stack up against my peer group. Whether you are a millennial, baby boomer or from Gen X, you can hop over to the quiz and answer a few questions to see if your habits are in line with your peers.
Don’t worry if you don’t fit in financially though, because that could actually mean you have better saving habits than your peers. At the end of the day, it’s self-discipline that will get you to the finish line.
And T Rowe Price wants to help. In addition to sponsoring this post to help spread the word of the quiz, they even threw in a few financial nuggets that are generation appropriate.. The advice is short and to the point, so it’s worth checking out.
Check out the “Do You Act Your (Savings) Age” quiz here.
*T. Rowe Price Retirement Saving & Spending Survey, 2015
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Great insight Andrew.
$57k does seem a bit high for millennials who are generally just starting out in their careers, but I assume T Rowe Price needed a big enough sampling size and found it difficult to gather enough people who were participating in 401k plans at lower income ranges.
What’s most interesting about this article is that link to the T.Rowe “Do You Act Your (Savings) Age?” study. Diving into the data there is pretty interesting to see how millennials are saving vs. their baby boomer counterparts. Curious to know how evenly distributed are these two test groups. Picking off private sector millennials with a median income of $57k may be selecting a little too high.
I’m a millenial, but the survery states I act like a Gen Xer. Currently I’m at a 40% savings rate and am working towards 50% for 2016. Sometimes it scares me when I hear baby boomers I work with stating the low percentages they are saving for retirement. Hopefully this helps motivate other millenials to save more.
40% is awesome (50% is even better). Good for you John. I’m not sure if you feel the pinch at all but I can tell you that either way, you won’t regret saving this much now.