That generation started saving for retirement, putting money away in 401(k)-style accounts, nine years earlier than their baby boomer parents, according to a new study.
The “Retirement Reimagined” study by Charles Schwab Corp. points to the lack of pension plans, through which companies would take care of workers during retirement, as one of the factors driving millennials to start saving for retirement on their own.
Millennials, who are worse off financially than their parents in many ways, are also less likely to own homes, itself a source of retirement funding for boomers.
That doesn’t mean they think they’ll be able to retire, and their view of what retirement means is also very different from boomers’.
“Retired millennials will spend 24% less time on financial matters than boomers, and will use their savings to pursue the lifestyle and passions they desire,” according to the report, which surveyed 5,000 Americans and used predictive analytics to anticipate each generation’s retirement outcomes and attitudes.
Recently, millennials say they have taken a pause on saving. Nearly half of 18- to 35-year-olds are waiting “until things get back to normal,” according to a survey conducted earlier this year by Fidelity Investments.
Many younger workers are likely saving earlier for retirement than boomers simply because they were automatically enrolled in their company’s 401(k) plan rather than having to opt into such plans, as boomers had to do.
More workplace retirement plans are also adding automatic escalation clauses, where participants’ contribution as a percentage of their pre-tax paycheck automatically increases by 1% per year.
The Schwab study predicts that millennial retirees are more than 150% more likely to invest in cryptocurrencies and digital investments in retirement than boomers. That’s consistent with a finding in an Investopedia financial literacy study released earlier this month. That survey of 4,000 Americans found that 28% of millennials plan to use cryptocurrency to support themselves financially during retirement.
“The good news is that millennials have more time before retirement to take risks,” said Rob Williams, managing director of financial planning, retirement income and wealth management at Charles Schwab Corp. “But over time, retirement success comes from tried and true things like diversification, having ownership in the growth of the global and U.S. economy through traditional stocks, things that have cash flows and generate growth, and right now cryptocurrencies don’t qualify for that.”