They’re quirky, comfy and oh-so-entitled, but credit where credit is due. Millennials (at least some) are doing 401(k)s the right way.
Principal Financial Group took a look at the younger set, as well as their older Gen X counterparts, and found that, despite the “bad rap” they often get for their saving habits, there is a group of savers who are a “financial force to be reckoned with.”
The company dug into Gen X and Gen Y (Millennial) savers who are deferring 90 percent or more of the IRS maximum amount to their 401k account, between $16,200 and $18,000 per year.
Even though retirement is far off for these individuals, more than twice as many Millennials say they’re saving for retirement (90 percent) than raising a family (40 percent).
“These ‘super savers’ are incredibly driven,” Jerry Patterson, senior vice president of retirement and income solutions at Principal, said in a statement. “We see them making sacrifices to achieve their goals, and sometimes that includes delaying milestones until they feel financially secure. Whether it’s driving an older vehicle or working extra hours, these individuals have said ‘my future is important, and I’m going to save to make it great.’”
There are a number of ways that Millennials and Gen Xers are able to save so much for retirement. Many say it’s a matter of prioritization, and making small sacrifices today helps them better prepare for tomorrow. Where can the average saver start?
The following are some of the top areas “super savers” compromise, according to the company:
- Cars: Nearly half of “super savers” are driving older vehicles (47 percent) in order to direct dollars to their retirement savings.
- Homes: Cars aren’t the only carefully considered big ticket purchases. “Super-savers” often choose to live in modest homes (45 percent) and, among millennials, 18 percent are renting vs. buying.
- Vacations: “Super-savers” are prioritizing retirement savings over the vacation fund and many say they are traveling less than they’d prefer (42 percent).
- Work: All this extra work comes at a price. Two in five (40 percent) “super savers” say they put up with work-related stress and more than a quarter (27 percent) also put in extra hours instead of spending time with friends and family.