The good news is that the vast majority of millennials are saving for retirement. The bad news is that they’re only saving through their retirement.
A whopping 92 percent of millennials are socking money away for their golden years, says a study from digital investment service Wealthsimple. But only 35 percent are investing money outside of a work-sponsored plan.
One reason millennials aren’t investing outside of work benefits is — they don’t know how. Thirty percent of those not investing beyond a work-sponsored retirement plan say so. And if they do, they want to see that investment go toward a good cause.
Four out of five millennials want to know the companies they select for their investment portfolio are socially responsible. Here are the top issues they want to see their investments support…
- Renewable energy: 44 percent
- Fair labor practices: 41 percent
- Gender equality: 36 percent
- Poverty reduction: 36 percent
And those figures break down even further when gender is involved.
Men and women don’t see eye to eye on what to invest in
Forty-two percent of millennial women would prefer to invest in a company that supports gender equality. Less than one-third of men say the same.
Both sexes may disagree on what issues they support, but women are investing less than men overall. Only 26 percent of women would invest in an employer-sponsored retirement plan, compared to 43 percent of men.
And it’s women who are dealing with more of a burden when it comes to money, as 47 percent of them say that money is the most stressful thing in their lives. Only 34 percent of men say the same.
This is detrimental to women not just now but throughout their entire lives. Women are more stressed at work than their male colleagues but women also earn less. Since pay disparity is holding many women back from earning the same, it might explain why they can’t find any reason to invest in other retirement plans — because they don’t have any extra cash to put toward one.
Even as they lack the resources to invest, many women say they should be more active in making financial decisions since there could come a time when their partner is no longer around. Most of the time, though, they leave it up to their male partners and husbands to make those decisions for them.
But not only do women need to make those decisions themselves — or at least participate in joint decision-making — they need to do it as soon as possible. Women are living longer than their male partners, which means they need to understand how their retirement works in the event their spouse passes before them.
Millennials will have more money in retirement
Most millennials have probably never heard of the Pension Protection Act of 2006, — it was passed when many were just entering the workforce. But it’s helping millennials pull ahead of their parents and grandparents in retirement savings.
It’s a law that “imposed more stringent funding requirements for defined benefit pensions. It also spurred important improvements in workplace 401(k) plans,” Time Money reports.
Since then, 41 percent have been automatically enrolled in a workplace retirement plan. That’s compared to 38 percent of Gen Xers and 33 percent of baby boomers, according to a survey from Empower Institute.
The Act allows automatic enrollment of plan participants, automatic escalation of participants’ contributions, and notes how vital employer contributions are to employee accounts. Because of this, millennials are on track to replace 75 percent of their income in retirement. Gen Xers will only get about 61 percent. And baby boomers are on track to replace 58 percent.
“Millennials are the first generation in the workforce to fully benefit from changes in the law made in 2006,” says Empower Retirement President Edmund Murphy. “New features such as auto enrollment and auto escalation have come a long way in making access to retirement savings programs easier for employees.”
Because of their confidence in retirement planning, millennials aren’t as scared as older generations about working in retirement. Nearly half of baby boomer respondents — 48 percent — believe they will need to work in some capacity during retirement, compared to 44 percent of Gen Xers and 40 percent of millennials.
Empower’s survey also notes most millennials believe federal assistance will still be around when they retire. Nearly 60 percent of millennials think they’ll collect Social Security when they retire. Comparatively, 88 percent of baby boomers are relying on Social Security during retirement.
Millennials credit scores and credit homeowner myths
While millennials may have their retirement plans relatively in place, they might want to start concentrating on their credit scores.
A recent survey from Ellie Mae found that there really isn’t any consistency to millennial credit scores. The scores are all over the map. Residents in some coastal cities have higher scores than those living inland, but that isn’t the case nationwide.
The Ellie Mae survey broke down credit scores based on home loans closed by millennials. Among the findings, San Francisco residents averaged the highest score at 757. Here are the four other states that made the Top 5…
- Los Angeles, California: 745
- Mitchell, South Dakota and Indiana, Pennsylvania: 733
- Miami, Florida: 722
- Boston, Massachusetts: 701
Additionally, most millennials incorrectly believe that they need a perfect credit score to qualify for a home loan. They’re hesitant about making the leap into homeownership despite the fact that credit scores vary drastically around the country.
Mortgages and other home costs are confusing would-be buyers from making the big purchase. However, those who are buying them aren’t wasting any time — even with walk-throughs. Almost half of millennials are closing deals without even visiting homes in person — only online.
For those who are looking for a home — preferably those they’ve stepped foot inside — check out some millennial-friendly places.
Did we provide the information you needed? If not let us know and we’ll improve this page.
Let us know if you liked the post. That’s the only way we can improve.