Millennials vs. Generation Xers and Baby Boomers
Contrary to their reputation, Millennials stack up surprisingly well against Baby Boomers and Gen Xers across key financial wellness indicators, including debt and savings rates. However, Millennials diverge when it comes to investing for the future.1 For example, Millennials are saving nearly as much for retirement as Baby Boomers (as a percentage of annual salary) and are more likely to track expenses and budget.2 Yet, Millennials have less wealth than previous generations; Millennials’ median net worth was under $10,400 in 2013, down from the $18,200 that Gen Xers had when they were under 35 in 1995.3
Millennials are saving slightly less than the Gen X populations and Baby Boomers, but these youngest members of the workforce are demonstrating smart decision making in areas that will prepare them well for retirement. For example, Millennials’ key financial concern is “progress made toward financial security.4 Additionally, workers in their twenties start saving at the median age of 22, despite having credit card debt and student loans.5
At the start of this year, the Pew Research Center forecasted that Millennials will overtake Baby Boomers by population in 2015.6 According to Pew, Baby Boomers always have had an outsized presence in comparison to other generations, while Gen Xers have had a smaller presence.
The imbalance of Baby Boomers near or at retirement age and Gen Xers in the workforce has raised concerns about the viability of Social Security. Furthermore, 60 percent of Millennials in T. Rowe Price’s Retirement Saving & Spending Study agreed with the statement, “I expect Social Security to go bankrupt before I retire.”
Millennials need to accumulate more savings and diversify their investments, indicating a need in financial education around investment choices. Millennials do have time on their side, and they appear to be aware of their responsibility to prepare for retirement.
Millennials’ bleak prospects about Social Security and their willingness to save early should be encouraging for plan sponsors that want to engage younger employees, especially with the aid of new technologies.
1Based on Retiremap implementation data from Q2 2015.
2Retirement & Saving Spending Study, T. Rowe Price.
3New York Times.
4Employee Benefit Trends Study, MetLife 2014 & 2015.
5Retirement Throughout the Ages: Expectations and Preparations of American Workers, Transamerica Center for Retirement Studies.
6This year, Millennials will overtake Baby Boomers, Richard Fry, Pew Research Center, January 15, 2015.
This is an excerpt of Retiremap’s, Financial Wellness Insights, Key Data Insights on Financial Wellness, September 2015. Slight modifications were made for compatibility purposes.