With lower average income than their Boomer counterparts, it’s important that millennials begin saving regularly, if they are to be able to retire at what only feels like the far distant future.
According to a research report from the Wells Fargo Investment Institute, forty one percent of millennials—those between 17 and 35—have not yet started saving for retirement. That doesn’t sound so bad, but if you dig a little deeper, a generational problem becomes evident.
CNBC recently posted an article, “Nearly half of millennials haven't starting saving for retirement.” The article explains that the median household income for millennials in our country is about $48,000. That number is about 20% less than Baby Boomers earned at the same stage in life, according to the report. It’s important to note that this lack of savings will have a significant impact on their futures.
One consequence is that people may be forced to delay retirement. The Wells Fargo researchers found that 50% of today's workers anticipate they’ll need to work until at least 70, because they won’t have enough saved for retirement.
The Wells Fargo Investment Institute report cites the Bureau of Labor Statistics, which indicates that wages are starting to rise. That is driving consumer discretionary spending. For example, millennials spend about $2,200 annually on travel. That amount is expected to go up, as the generation enters its higher-earning years. However, about 34% of millennials have student debt of at least $20,000. The report says that 75% of those who have debt, consider it to be unmanageable.
Millennials are bringing other changes to the markets. The research shows that the evolution of social media and the ease of global communication means that younger generations will be more likely to invest overseas, especially to pursue social goals.
Baby boomers (ages 53 to 71) may also have to make some changes to their investments. Roughly 73% of baby boomers are investing for retirement, but many now think they may have to work a few extra years to have enough to retire comfortably. One consequence is that boomers may stay more involved in the stock market longer than in past generations.
According to the report, boomers may also be changing how people traditional behave when it comes to their investments during their later working years. The combination of a low interest rate economy and longer working lives, means that boomers will are more likely to stay invested in equities, rather than switching investments to bonds.
A dramatic uptick in health care spending is expected to hit the baby boom generation, who control more than 50% of the nation’s wealth.
Reference: CNBC (September 5, 2017) “Nearly half of millennials haven't starting saving for retirement”