New study suggests potential financial troubles for millennials
If your grandmother urged you to save for a rainy day, she did it for a reason. That’s because she likely knew the importance of putting away money for retirement.
Well, it turns out that a large swath of the American public isn’t heeding granny’s advice. A new study released by the University of Missouri (MU) suggests only 37.2 percent of working millennials have some type of retirement vehicle.
That’s kind of a big deal when one considers a 2015 U.S. Census survey shows that this age group makes up roughly 25% of our population.
According to the study’s authors, published in the Family and Consumer Sciences Research Journal, the findings could indicate younger people badly need more education around planning for the future.
“I’ve don’t make enough to invest in my company’s 401k plan. I can barely pay my bills now,” said Stephen McBride, a 32-year-old Chicago man who Guy Counseling spoke to about his retirement planning efforts.
McBride is employed in the IT sector for a large Fortune 500 company and is married with a 2-year old. “My wife works full-time too and can’t contribute to her plan either. We both have student debt – plus the baby,” he adds.
In looking at metrics, he’s not the only one struggling with socking away dough.
A look at the numbers
Rui Yao, an associate professor of personal and financial planning at MU, along with doctoral candidate Guopeng Chen, conducted the investigation.
Related: Can buying a coffin online save money on funerals?
The duo pulled data from the 2013 survey of consumer finances, put out by the Federal Reserve System, to assess the savings behaviors of millennials.
To be eligible for inclusion in their study, a person needed to have at least a year of employment. That’s what many employers require before someone can contribute to a retirement plan, like a 401-K or 403b.
Here’s what they found out:
- Just 37.2 of millennials had a retirement account of some type.
- Black respondents had 52.9% lower savings for retirement when compared to their white counterparts, even though both groups shared the same income.
- Millennials with a college degree were more likely to have a retirement vehicle when compared to folks who just had a high-school diploma. But the advanced degree holders socked away (as a percentage) less.
- Just 17.6% of self-employed millennials had a retirement vehicle of any kind.
In a press release about the study, Yao and Chen theorize that because millennials are less likely to have things like pension plans – something older generations once enjoyed – they are now required to shoulder greater responsibility for their golden years.
Complicating matters are uncertainties about the future of social security, coupled with the fact that millennials are on track to live longer than previous generations.
A recent report by the Pew Research Center offered a working definition of millennials, suggesting that persons born between the years 1981 and 1996 fall into this category.
When you do the math, we’re talking about folks who are currently 22-37 years old.
