Far fewer Millennials than Baby Boomers are counting on Social Security to fund at least part of their retirement, yet a new study shows the younger generation is doing little to make up for the money on which they might miss out.
To uncover differences in retirement savings habits among Boomers (those born between 1946 and 1964) and Millennials (those born between 1981 and 1996), Apple Federal Credit Union distributed surveys to 25,000 of its members.
Among respondents, around eight in 10 Boomers “say Social Security is factored into their retirement planning.” Just 22 percent of Millennials feel the same.
While the younger generation is likely right to be skeptical, their behavior doesn’t exactly reflect their concern. Only six in 10 Millennials surveyed are saving for retirement compared to 90 percent of Baby Boomers.
Deciding whether or not to save may not even have much to do with how much one is earning. “Sixty percent of Boomers say they have made sacrifices in order to put more money away for retirement, while only 48 percent of Millennials say they have sacrificed to save money,” according to the report.
Also less than helpful, fewer younger investors are seeking professional advice. Fifty-four percent of Boomers have a financial advisor. Only 29 percent of Millennials say they use one.
“The most popular reason both say they do not use an investment advisor is to avoid paying someone for the service,” Apple Federal Credit Union said in its report. “This is despite several investment studies, including from Vanguard Funds and Morningstar, showing that clients working with a good financial advisor receive on average a 3 percent increase in the value of their portfolios each year.”
It stands to reason that the proximity to which each generation is to retirement plays a role in the degree to which each is saving, but there’s (a great deal of) room for improvement nonetheless.
Beyond the differences, data found many similarities in the financial behaviors of both cohorts. Of those who are participating in 401ks or other retirement savings plans, Boomers and Millennials are saving at similar rates, socking away between 5 to 10 percent of their income.
A little over half (55 percent) of the older generation say they enrolled in their employer-sponsored retirement plan, while a little under half (47 percent) of the younger generation say the same.
Both generations prefer similar investment vehicles, as well, with mutual funds (72 percent), stocks (52 percent) and bonds (30 percent) favored the most.
And one area in which both Baby Boomers and Millennials could do better? Only half of those who are saving in a 401k are contributing enough to earn their employer’s full match.
“This is free money,” Jeff Callan, Vice President Apple Financial Services, Apple Federal Credit Union, said in a statement. “Everyone should be maxing out their employer match if it is offered. Otherwise, they are leaving money on the table.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.