Millennials are far more diligent about saving than Baby Boomers, according to T. Rowe Price’s Retirement Saving and Spending Study. Forty percent of Millennials have increased their retirement savings in the past 12 months, nearly double the 21% of Boomers who have done so. Most Millennials also track their expenses carefully (75%) and stick to a budget (67%), compared with 64% and 55% of Boomers, respectively.
In addition, 47% of Millennials wish their employer had automatically enrolled them into their retirement plan at a higher rate, compared with just 34% of Boomers. In fact, more than a quarter of Millennials (27%) said they would not opt out of their plan if their employer automatically enrolled them at 10% or higher. Millennials also want help with their finances—58% of this age group say they would benefit from assistance in managing their spending and debt, versus only 24% of Boomers.
Nearly half (47%) of Millennials are invested in target-date funds (TDFs), and 79% of these investors say they understand that these funds hold a mix of asset classes that change over time.
However, Millennials’ average
deferral rate is slightly less than Boomers’, with Millennials saving an
average 8% of their salary and Boomers saving 9%.
The study also reveals that a vast majority (88%) of Millennials believe they live within their means, and nearly three-quarters (74%) say they are more comfortable saving and investing extra money than spending it. Nearly six in 10 of Millennials (59%) set their 401(k) contribution rate to take full advantage of their employer’s matches, and 72% believe they are better off financially than their parents were at their age. When asked what their top two financial goals are, 28% said paying down debt, and 27% said saving for retirement.
“It’s encouraging to learn that Millennials
are so receptive to saving for retirement and are generally practicing good
financial habits,” says Anne Coveney, senior manager of retirement thought
leadership at T. Rowe Price. “These Millennials are working for private sector
corporations, with a median personal income of $57,000 and an average job
tenure of five years. So, their circumstances may be somewhat driving their
behaviors. When they have the means to do the right thing, it appears that they
The survey finds that despite the stereotype that Millennials are spendthrifts and have short-sighted thinking, they are “exhibiting financial discipline in managing their spending,” Coveney says.
The T. Rowe Price report is based on a survey of 3,026 retirement plan participants between February 19 and March 25. The full report can be viewed here.