By Zoë Henry
Attention, employers and Baby Boomers: Younger workers might not be the spendthrifts you thought they were–at least when it comes to their 401(k)s.
According to new data from the Retirement Saving Spending Study, Millennials (those between the ages of 18 and 33) actually have better financial habits than Baby Boomers (ages 51 to 69).
The data found that 72 percent of young workers surveyed were better off financially than their parents were when they were the same age. The report surveyed more than 3,000 working adults contributing to 401(k) plans–roughly half were Millennials–to learn how Americans spend and save up for retirement.
They also surveyed 255 Millennials who were eligible for, but not contributing to, a 401(k), as well as more than 1,000 retirees with a rollover IRA or remaining 401(k) account balance. The findings were divided up by demographic to determine how Millennials are faring compared with their (traditionally more robust) older counterparts.
There’s some truth to the popular belief that Millennials aren’t the most financially savvy generation. Millennials save an average of 8 percent of their annual salary for retirement, compared with an average of 9 percent for Baby Boomers. However, Millennials are increasing their 401(k) savings by more overall.
The percentage of Millennials saving a greater portion in retirement funds is in fact roughly double that of Baby Boomers.
With new access to trending technology, and an increased desire to reach out for fiscal help, Millennials are more likely than Baby Boomers to be tracking their expenses and budget, the report finds.
It’s worth noting that the younger workers surveyed were all employed, so the sample is simply a general reflection of Millennial habits. It’s easier to penny pinch with a sizeable income, or at least in theory.
The median personal income for Millennials surveyed is $57,000 annually, and the average job tenure is five years, says Anne Coveney, senior manager of Retirement Thought Leadership at T. Rowe Price. The overall median salary for the average Millennial is estimated at around $35,000 for men, $30,000 for women.
“Their circumstances are probably a big part of what’s driving their behaviors,” explained Coveney. “They know to save. It may be because they’ve had the benefit of reading a lot on the internet, and getting information from their employers. They also do use [financial] advice,” she adds.
Millennials estimate that financial professionals would want them to save as much as 9 percent of their annual income, for instance, and although that’s not as much as the 15 percent that T. Rowe Price advises, Coveney notes that it’s still a significant amount.
That said, if you’re a small-business owner with young employees, it’s beneficial to factor in their preferences when it comes to the types of retirement plans you offer. Consider auto-enrollment features with higher contribution rates (i.e., 6 or 7 percent), and be sure your employees have good access to the right financial resources to help them make decisions.