Millennials: The DIY Generation’s Take on 401(K)’s – How do you compare?

Two thirds of Millennials1 expect to self-fund their retirement with retirement accounts such as 401(k)’s.  Deeply concerned that Social Security will not be there for them when they retire, Millennials are taking action to prepare now.  Are you?

Findings from the 15th annual Retirement Survey by the Transamerica Center for Retirement Studies®* can help Millennials see how they stack up against their peers.  The good news: Millennials started saving at a median age of just 22, a tremendous head start as compared to older generations.  Seventy-one percent of Millennials who are offered a 401(k) plan participate, and the median level of their retirement savings has grown from $9,000 in 2007 to $32,000 in 2014.

Other interesting findings from the Survey include:

  •  Among Millennials who participate in a 401(k), the median contribution rate is 8%.
  • 40% of Millennials in a 401(k) plan set their own asset allocation percentages among available funds.
  • 67% of Millennials would be likely to leave their current employer for a similar job offering better retirement benefit
  • 18% of Millennials frequently discuss savings and planning for retirement with their family and friends.
  • 81% of Millennials fear that when they turn 65, Social Security has the same chance of existing as Blockbuster Video, and are not planning for it to be there for them when they retire.

Millennials are applying a DIY mindset to their retirement portfolios, yet they may be in need of more professional assistance.  Millennial workers estimate that they will need to save $800,000 for retirement, but the majority admitted that they “guessed” what this figure should be.  Only one in ten Millennials have used a retirement calculator and less than 15% have a written plan for their retirement.  While 61% of Millennials say they want professional advice when investing for retirement, just 32% use a professional financial advisor to help them, the fewest among all generations surveyed.

Here are some tactics for Millennials seeking retirement success that most financial professionals would agree on:

Save early, save oftenThe benefits of compound interest show how that when you start saving can quickly outweigh how much you save.

Retirement benefits matter as part of total compensation.  Retirement plans are an employer-provided benefit which should not be overlooked when searching for a job. Ask your current employer about setting up a plan if one is not currently offered.

Take the Match.  Employer-matched contributions are one of the best investment options available – at 100% return on your money in one day, you’re not likely to find a better investment.

Develop a retirement strategy.  Don’t guess at your retirement needs, calculate it.  Create a well-defined, written plan and you will know how much you need to invest and how to allocate your portfolio.  You’ll feel an incredible pressure release.  It will help you sleep at night, we promise.

If needed, seek an advisor.  Ask your employer if they provide professional advisor services.  Better yet, use the “Let’s Talk” tool on the right-hand side bar and we’ll call or email you back soon.

1Millennials, an abbreviation for millennial generation, is a term used by demographers to describe a segment of the population that came to maturity around the year 2000.

*The Transamerica Center for Retirement Studies Annual Retirement Study can be found here:

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