Here’s a shock—people tend to favor instant gratification over delay and discipline. Not exactly news, but for 401(k) saving, in particular, it’s THE challenge the industry increasingly faces when getting young people to invest early and often.
New research reinforces the issue, with Navient’s Money Under 35 national study reporting that early four in 10 young adults in America believing that saving for retirement can wait.
It also finds that many young adults, ages 22 to 35, tend to prioritize short-term goals like homeownership, saving for vacation, paying down debt or building an emergency fund.
“Many millennials just starting out may struggle to balance paying down debts and saving money, especially for retirement,” Julie Wilson, head of research for Navient, said in a statement. “Our research explores how these trade-offs affect their financial health in the short term.”
Key findings include:
- Only three in 10 young adults report saving for retirement. Of those who are saving, the average amount saved was $32,818 last year, a decrease from the 2016 average of $37,638.
- Bachelor’s degree holders are the most likely to be saving for retirement. Nearly half of bachelor’s degree holders aged 22 to 35 are saving for retirement, more than their peers with other levels of education.
- Student debt is not preventing young adults with a degree from saving for retirement; however, graduates who paid off their student loans are able to save more.
- Young adults who can simultaneously pay down student debt and save for retirement are more likely to report better financial health. However, for those who prioritize one goal over the other, young adults who pay off debt are more likely to feel “very good” about their financial health, compared to those who prioritize saving for retirement.
- Young adults with access to an employer 401K-match program are nearly twice as likely to save for retirement. Young adults whose employers offer a 401k plan have an average of $32,851 saved for retirement, nearly 75 percent more than those who don’t have that access ($18,879).