Why are millennials snubbing defined contribution retirement plans and stashing their money into taxable brokerage accounts instead?
The retirement plan industry is overly focused on a goal—namely saving for retirement—that doesn’t resonate with young investors, says
Millennials, or Generation Y as the youngest generation of investors is also known, aren’t thinking about or even looking to retire, says Brown. They’re looking for financial freedom and greater control of their work-life balance. Almost two in five (38%) are focused on saving to have enough money to be able to work less, according to a new Hearts & Wallets report.
“There’s a disconnect between what industry is telling them they should be saving for and what they really want to do,” says Brown.
In the report, Hearts & Wallets found that 74% of affluent millennials—those with more than
Millennials hesitate to invest too much money in retirement plans because they don’t have access to the money without paying a penalty. The penalty-free access to capital and greater investment choices of online brokerage accounts make them a far more attractive choice for younger investors generally focused on short-term goals, such as saving for vacation or an emergency fund.
Rather than focus on retirement savings, the retirement plan industry should stress benefits that appeal to millennials, such as tax deferral and employee matches, the research firm urges.
The preference for online brokerage accounts squares with a recent
The Hearts & Wallets study is based on a survey of 4,971 U.S. households conducted in June of 2013.
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