The retirement outlook for many Millennials is dismal, according to a new report from the National Institute on Retirement Security, Millennials and Retirement: Already Falling Short.
The report finds that 66.2% of working Millennials have nothing saved for retirement. While 66% of Millennials work for an employer that offers a retirement plan, only 34.3% are participating in the plan.
The Institute also found that only 5% of Millennials are saving adequately for retirement, which it recommends to be between 15% and 22% of salary.
There is a significant gap between Millennial Latinos and other racial and ethnic groups in terms of participation in retirement plans. Only 19.1% of Millennial Latinos and 22.% of Latinas participate in a retirement plan. By comparison, 41.4% of Asian men and 40.3% of Millennial white women participate in a plan.
Just over four in 10, 40.2%, of Millennials said employers’ eligibility requirements, such as having a minimum tenure on the job or working a minimum number of hours, have kept them from participating in the plan. However, when they are eligible to participate, 90% of Millennials enroll in the retirement plan.
Twenty-one percent of Millennials are worried about their retirement security. Nearly half, 47%, are worried they will not be able to retire when they would like to, and 67% are concerned they will outlive their savings. More than nine in 10, 92%, say the nation’s retirement system is under stress and needs reform.
The Institute says that Millennials face more challenges than older generations, specifically higher life expectancy, lower income replacement from Social Security and less likelihood that they have a pension. They also have faced depressed wages, high unemployment and structural changes to the U.S. economy, most notably the Great Recession. Thus, the Institute says, they will need to save more than older generations.
- Expand defined contribution plan eligibility for part-time workers
- Reduce waiting periods for workers to become eligible to participate in a retirement plan
- Increase auto enrollment
- Increase employer matches and default contribution rates
- Provide education to increase awareness of the benefits of employer matches
- Promote and educate Millennials about the Savers’ Credit
- Protect and strengthen Social Security