Millennials and Retirement Savings
We’re back with another edition of ClearPath – Your Roadmap to Health & Wealth. I’m your host, Al Waller.
COVID-19 has complicated workers’ financial and retirement security across generations and the pandemic’s full impact is far from becoming clear.
Although Millennials are a long way away from retiring, Catherine Collinson, president of Transamerica Center for Retirement Studies, has some interesting insights into their retirement preparations.
To begin with, Catherine, can you please give us some background on the Millennial generation and what makes their retirement position so unique?
Absolutely. Most Millennials were entering the workforce around the time of the Great Recession when it was really difficult to find full-time employment. Many had student loan debt—which also put them behind the financial eight ball. Now, the pandemic and current recession are further complicating Millennials’ ability to make ends meet, let alone build emergency savings, and save for retirement.
I read in one of your most recent reports that Millennials are more likely take out funds from their 401(k)s or other types of retirement accounts compared older generations as a result of the pandemic. How big is this problem?
That’s right, Al. Our recent survey found that one in three Millennial workers have already and/or plan to take a loan and/or withdrawal from their retirement savings as a result of the pandemic. While retirement may seem far in the future for Millennials, dipping into retirement savings can result in their missing out on the growth of those assets over a long time horizon. And they will need that savings when the time comes to retire.
Oh, how time flies. The days may seem long, but the years have a way of flying by. So, what are your recommendations for Millennials?
Explore all of your options to determine if dipping into retirement savings is the best option. Familiarize yourself with the costs and consequences of doing so. In some cases, dipping into retirement savings may be the best alternative—but not until after you’ve done your homework. If your employer’s 401(k) allows taking a loan, consider that option instead of an early withdrawal, take only what you need, and set forth a plan to ensure you can pay yourself back.
Lastly, I encourage Millennials to avoid kicking the can down the road and heed the experience of older generations. In our recent survey of retirees, many said they waited too long to concern themselves with saving and investing for retirement.
Thanks, as always, for great information and insights. We’ll be back to talk about this and other issues in the future. In the meantime, please stay safe. Thanks for listening to ClearPath – Your Roadmap to Health on WYPR, your NPR news station.