Millennials: Sandwich Generation of Retirement Savers
Al Waller: Our retirement landscape is evolving due to population aging, increases in longevity, employer benefit trends, and looming reforms to Social Security. It is shifting so rapidly that many of the underlying assumptions about retirement differ across generations in the workforce.
Welcome back to ClearPath – Your Roadmap to Health & Wealth SM. I’m your host, Al Waller. Joining me is Catherine Collinson, founding CEO and president of Transamerica Institute® and its Transamerica Center for Retirement Studies®. In this second episode of a 4-part series about the retirement outlook of four generations currently in the workforce, Catherine will be sharing survey findings about Millennials from her team’s new research report Post-Pandemic Realities: The Retirement Outlook of Four Generations.
Before we get started, I want to remind our listeners that we would love to hear from you and get to know what topics you’d like to hear about. Please drop us a line at [email protected].
Catherine, let’s jump right in. Who are Millennials? What is their retirement outlook?
Catherine Collinson: Millennials were born between 1981 and 1996 – and they were named such in reference to their coming of age around the turn of the millennium.
Millennials entered the workforce around the Great Recession, which began in late 2007. They experienced a turbulent economy in their early working years and again, recently, during the pandemic and its aftermath. They started their careers with higher levels of student debt than previous generations. And they waited to buy homes, get married, and start families.
However, having increased access to 401(k)s than previous generations along with a greater awareness of the importance of saving, many Millennials got a strong and early start in saving for retirement.
Al Waller: This leads me to wonder. How are Millennials doing today?
Catherine Collinson: Now in their late twenties to early forties, Millennials have entered their sandwich years of juggling careers, raising children, and caring for aging parents. Many are overcoming setbacks from the pandemic – and many are financially struggling.
Specifically, 44% of Millennial workers experienced one or more negative employment impacts as a result of the pandemic, and 30% became unemployed during the pandemic for various reasons.
Where does that leave them now? Almost half of Millennial workers have trouble making ends meet (48%) despite their best efforts to bring in income. More the one in five (22%) currently have two or more jobs and 45% have a side hustle.
Al Waller: You mentioned Millennials are in their sandwich years. What are some examples in your survey findings that illustrate this?
Catherine Collinson: Looking at their current financial priorities, Millennial workers often cite paying off debt (60%), saving for retirement (52%), building emergency savings (46%), supporting children (44%). Almost one in six cite supporting their parents (17%) as a priority.
Al Waller: Those are competing financial priorities indeed! Did the survey examine the extent to which Millennials are caregiving?
Catherine Collinson: Yes – and the survey found Millennial workers to be more likely than other generations to be caregivers. Four in 10 Millennial workers are either currently serving as a caregiver and/or have served as a caregiver in the past. Among them, almost nine in 10 (89%) made one or more adjustments to their employment ranging from missing days of work and reducing hours, to forgoing a promotion or quitting a job altogether.
Al Waller: Clearly, Millennials are stretched with immediate and pressing priorities. How are they doing with their long-term planning and retirement savings?
Catherine Collinson: Millennials got a strong and early start which bodes well for them. Seventy-eight percent of Millennial workers are currently saving for retirement in a 401(k) or similar plan and/or outside the workplace. They began saving at age 25 (median). Those participating in a 401(k) or similar plan are now contributing 12 percent (median) of their annual pay. However, I’m concerned that many may be falling behind, either due to pandemic-related setbacks or their competing financial priorities.
By the numbers, Millennial workers have saved $49,000 (estimated median) in total household retirement accounts but only $3,500 (median) in emergency savings.
Without sufficient emergency savings to cover a financial shock such as a roof repair or getting laid off, a concerning percentage of Millennial workers are turning to their retirement savings. Almost one in four (24%) have dipped into their retirement savings by taking a hardship withdrawal or early withdrawal from a 401(k) or similar plan or IRA – and subjected themselves to income tax and a potential 10% penalty – which is counterproductive.
Al Waller: That’s scary. Although Millennials may be falling behind on their retirement savings, it sounds like they’re doing a better job at saving for retirement than emergencies.
What word of wisdom can you offer to help Millennials get back on track with their retirement savings?
Catherine Collinson: The good news is that Millennials still have a fairly long time horizon to save and invest before retirement. However, it is crucial that they stay focused on it. Especially juggling so many priorities, time flies and it can be easy to procrastinate, so avoid that temptation.
Al Waller: You’re so right. Looking back on my own sandwich years, it was easy to blink and a year could have flown by – and blink again, it’s five years. What specific tips can you offer to help Millennials stay focused?
Catherine Collinson: There’s no time like the present to engage in planning. In that spirit, I’ll offer these three tips based on our survey findings:
- Formally estimate your retirement savings needs. Almost half of Millennial workers (46%) providing a savings estimate in the survey indicated they “guessed” the amount.
- Create a retirement strategy. Only 34% of Millennial workers have a financial strategy for retirement in the form of a written plan. In creating a plan, consider sources of income and expected everyday expenses as well as extraordinary expenses. Don’t forget to factor potential investment returns and inflation.
- Seek professional assistance, if needed. Six in 10 Millennial workers would prefer to rely on outside experts to manage and monitor their retirement savings plan, but only 37% use a professional financial advisor. If seeking the services of an advisor, start by consulting with your employer’s retirement plan provider or other financial institution that you already do business with. Also, before engaging an advisor, do your homework. FINRA’s Broker Check is a free tool to research the background and experience of financial brokers, advisers and firms. It can be accessed at brokercheck.finra.org.
Al Waller: Thank you, Catherine, for your perspectives and insights on this topic. Where can people go to learn more?
Catherine Collinson: If you’re interested in reading the report that we’ve been discussing, Post-Pandemic Realities: The Retirement Outlook of Four Generations, please visit our website at www.transamericainstitute.org.
Al Waller: Listeners, check out the other episodes in this four-part series about how different generations in the workforce are preparing for retirement. We’ll also discuss Generation Z, Generation X, and Baby Boomers.
Until our next episode, stay safe, be well, and thanks for listening.
ClearPath – Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being.
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