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The millennial retirement savers

Illustration of piggy bank with sunglasses. Dollar bills sticking out of the piggy bank.
Illustration: Eniola Odetunde/Axios

In an age where “ok boomer” is a rallying cry for young people fed up with older people who don’t understand them, stereotypes abound of millennials spending money poorly.

The big picture: Labor economist Teresa Ghilarducci tells Axios that millennials don't behave differently than prior generations — they're just thrust into different circumstances. They’re less likely to be offered pensions or qualify for employer-sponsored retirement plans, so they start saving later in life and accumulate less compared to their predecessors. Two-thirds of millennials have no retirement savings at all.

Why it matters: Millennials are better educated, more diverse than ever and they’re now the largest labor force in America. But they also have a lower net worth and make less than their parents did, and their ratio of wealth to income is projected to remain lower than Gen Xers and Boomers throughout their lives.

  • “I reject any idea that millennials are more or less worried or indulgent,” Ghilarducci says. “I don’t see anything like that in the data.”
  • A Pew report also suggests that external factors — debt, flat earnings and increasing expenses — account for differences in their wealth compared to other generations.
  • The median net worth of millennial households was $12,500 in 2016, while Gen Xers had $15,100 in 2001 and boomers had $20,700 in 1983.

Yes, but: There is a small cut of the millennial population — known as “Super Savers” — who save a significant percentage of their income for retirement.

  • Saving "was a way for us to just get more control" in response to the last recession, Millennial Money creator Grant Sabatier tells Axios.
  • According to a survey by the Transamerica Center for Retirement Studies, 71% of millennials join employer-sponsored 401(k)s or similar plans, if they are offered.
  • And 38% of millennials contribute more than 10% of their income to these plans. They save more than Gen Xers (32%) and similarly to boomers (39%).

A recent study from financial firm Principal examines the habits of “Super Savers” — defined as those who save 90% or more of the IRS maximum or 15% or more of their income for retirement.

  • Their big sacrifices? 41% limit travel, 41% own “modest” homes and 43% drive older cars.
  • Jerry Patterson, senior vice president at Principal, tells Axios that family is one of the biggest influencers: 80% of super savers had parents who saved, and only 5% had parents who lived paycheck to paycheck.
  • Ghilarducci's data also suggests that many young people with large bank accounts “aren’t more prudent than others,” but benefit from inheritances, trust funds and not having student loans.

The bottom line: For millennials, having a lower net worth than their parents is part of their financial reality.

  • Even with many millennials managing to save more for retirement, on a larger level, “it’s meaningless until there are real solutions,” Ghilarducci says, like better retirement plans, cheaper education or even salary raises.
  • One thing most experts agree on is that saving a little, and early on, can still go a long way. “We’ve found that up to about 8%, there are very low opt-outs,” says Patterson. “You’ve got to build that nest egg.”

Go deeper:

Deep Dive - Retirement