Here’s What Retirement Savers of All Ages Can Learn from Millennials

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Millennials faced a special set of challenges as they came of age: 75 million of them entered adulthood while the U.S. economy was in or was just emerging from the 2008 financial crisis. Many felt firsthand the effects of the recession as they watched their parents and older family members take a financial hit. Surely, this experience changed the way the Millennials approach their own finances – and it just may have changed that approach for the better.

A new Schwab survey shows that Millennials are very much on track with their saving and investing habits, especially when it comes to their 401(k)s, often exhibiting more positive behaviors than their older counterparts.* This group recognizes the importance of saving for retirement, even though it may feel far away, and they know that a 401(k) is a critical tool in helping them save adequately. Their actions hold useful lessons for savers at all stages of their careers.

First of all, invest. The survey shows that Millennials are keeping on top of their personal finances, with 80 percent reporting that they have some money left over after paying their bills each month. They are also more likely than Gen Xers and Baby Boomers to invest any of those extra dollars in the stock market and in their 401(k) accounts. While I certainly understand the temptation to put any discretionary funds towards items and experiences in the present, I’d encourage you to think about treating your future self, too. The longer your money is invested in your 401(k), the more potential it has to grow over time.

Cut costs where you can. The survey shows that Millennials are cost-conscious as well: 51 percent say that fees influence their choice of 401(k) investments “a lot,” compared to 40 percent of Gen Xers and 38 percent of Boomers who say the same. This is a good reminder for anyone who invests to be mindful of the fees associated with your investments. Be on the lookout for any index mutual funds and exchange-traded funds (ETFs) on your 401(k) plan’s menu, as these often have lower investment management fees than actively managed mutual funds. Therefore, investing in them can mean using less of your savings to pay fees and leaving more of your savings in your account.

Even if you have a good handle on your finances, it can be wise to ask for a helping hand. Interestingly, though Millennials have spent the least amount of time both in the workforce and managing their money, the survey found that they are more confident making investment decisions on their own than are their older peers. Sixty-four percent say they are very or extremely confident making investment decisions solo, versus 47 percent of Gen Xers and 39 percent of Boomers.

This doesn’t mean that Millennials have it all figured out, though. The survey revealed that many of them experience financial stress, which has even affected their job performance. Unfortunately, Millennials are still grappling with the disproportionate burden of student debt, with 24 percent reporting that student loans are a source of their financial stress. Perhaps it’s not surprising then that Millennials are the generation most likely to seek professional financial help. Eighty percent of Millennials surveyed say they want personalized investment advice for their 401(k), and 93 percent say they would use a financial wellness program at work.

No matter your age, I would encourage you to follow Millennials’ lead and take advantage of any professional advice, managed account services or financial wellness resources that are available through your 401(k) plan or employee benefits package. A financial professional can help with a saving strategy based on your unique situation and can assist with the particulars of 401(k) management, like rebalancing investments, suggesting savings levels and more. Whether you have $100 to invest, or $100,000, check if your plan offers these types of services to help you make the most of your wealth.

With all this in mind, I find it encouraging that young savers are taking such an active role in managing their finances today with an eye toward the future. While it hasn’t always been an easy road for Millennials, financially-speaking, those in the survey have shown that they know they must take ownership of their financial future. Their proactivity, attention to fees and willingness to ask for help when they need it are lessons to us all.

Charles Schwab


*2017 401(k) Participant Survey conducted by Koski Research for Schwab Retirement Plan Services, Inc. Koski Research is not affiliated with Schwab Retirement Plan Services, Inc.

The information contained herein is proprietary to Schwab Retirement Plan Services, Inc. (SRPS) and is for informational purposes only. None of the information constitutes a recommendation by SRPS. The information is not intended to provide tax, legal, or investment advice; please consult with your accountant or investment advisor for how this applies to your specific situation. SRPS does not guarantee the suitability or potential value of any particular investment or information source. Certain information provided herein may be subject to change. None of the information contained herein may be copied, assigned, transferred, disclosed, or utilized without the express written approval of SRPS and its affiliates.


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