When it comes to saving for retirement, millennials with jobs are falling short in building up a solid nest egg, according to a new study from University of Missouri researchers.
Millennials made up more than 25% of the population in 2015, U.S. Census figures show. But the sizable sector of the labor force perhaps is not ready for retirement. The study revealed that just 37.2% of working millennials have retirement accounts, illustrating a need for increased financial education for retirement.
The study is reportedly among the first of its type to analyze the status of millennials’ retirement savings.
Rui Yao, an associate professor of personal financial planning, did the study with Guopeng Chen, a doctoral candidate in personal financial planning. They used the Federal Reserve’s 2013 Survey of Consumer Finances to look at millennials’ savings behaviors.
The duo was interested in the saving behaviors of millennials with at least a year of employment, making them eligible to contribute to a defined-contribution plan.
One compelling find showed that when comparing respondents with the same income and wealth, retirement account balances were 52.9% lower for black respondents than white respondents.
“While it could be assumed that millennials have plenty of time to save for retirement, they have to shoulder more responsibility than their parents and grandparents to do so,” Yao stated in a news release. “Compared to older generations, millennials are less likely to have employer-provided pension or defined-benefit retirement plans.
Additionally, there is increased uncertainty about Social Security, and millennials are likely to live longer.”
The researchers controlled for wealth and debt while analyzing saving behaviors. Yao’s future research will aim to determine why some millennials, like black respondents, had less in their retirement accounts than their peers and what accounts their wealth is saved in. “The results suggest that financial education about saving for retirement is absolutely necessary,” Yao stated.
Other findings from the survey:
-Advanced degree holders were more likely to have a retirement account compared to those with a high school diploma or below; however, the advanced degree holders saved a smaller amount.
-Among self-employed individuals, only 17.6% had a retirement account of any kind.
The survey comes as retirement benefits have changed significantly for various generations over the years.
“With the decline of defined benefit plans, millennials need to know much more about investing for retirement than their parents or grandparents did, Yao stated.
“Proper retirement preparation requires strategic and disciplined savings. Given that retirement accounts require the amount to compound, opening a retirement account early in one’s career is the best first step for effectively saving for retirement.”