Overachievers, don’tcha just hate ‘em?
They exist in all arenas, and the 401k space is no different.
Termed “super savers,” these 401k prodigies are Gen X and Gen Y employees who deferred 90 percent or more of the IRS max of $16,500 to $18,000 in 2017.
Their motive? Plain and simple—the majority (65 percent) of super savers are purely working toward “having a good life during retirement,” according to recent research.
The study, conducted by Principal Financial Group, discovered another 47 percent of this group is striving to pursue passions in their retirement years. And 44 percent cite high work-related stress as a factor contributing to making sacrifices now in lieu of saving for the future.
With retirement still somewhat far-off for most Gen X and Y workers, over half of these nest egg-devoted participants put away more than $20,000 in their retirement accounts in the last year.
“We tend to, in the financial services and advisory industry, focus on what people are not doing, or doing wrong,” said Jerry Patterson, senior vice president of retirement at Principal. “People at younger ages are given all the stereotypes, so this was actually a really positive piece of research. Let’s go find people that are doing the right things so we can help emulate them and explain them to people who could be doing it if they knew more.”
The findings suggested there was nothing complicated that would require them to “sacrifice their happiness, it was all pretty commonsense-based and practical,” he added.
“We tell young people that you’ll make great strides if you give up a few cappuccinos, but behaviorally we’re never going to get young people to give up their cappuccinos. But they understand the value of buying a used car, for instance, and driving it longer. Or maybe it’s smaller house than they could otherwise afford. If they travel, it’s domestic. So, foregoing a few bigger ticket items can be life-changing.”
But even near-perfect participants splurge now and again. When they feel the urge, super savers tend to take a trip (51 percent), subscribe to entertainment services like Netflix or Hulu (44 percent) or go shopping (27 percent).
Surprisingly, seven out of 10 super savers do not have a formal budget in place. And almost three-quarters say they learned nothing or very little in school about personal finances.
They instead were inspired by their parents’ savings habits (41 percent) or were driven by their family’s financial situation (33 percent).
“One thing that streamed through this research, from an advisor perspective, and something to really think about, is how you talk to younger investors about retirement, or don’t,” Patterson concluded. “The words that come up to the surface involve financial independence. They talk about that a lot more than they talk about retirement. They don’t have the confidence in Social Security, they’ll work for 12 different companies over the course of their career, so the quicker they can have some control, financially, the better.”
Jessa Claeys is a writer, editor and graphic designer.
