Common sense would suggest older workers have a much easier time saving than young adults. They are more likely to have already purchased a home, put kids through college and, by that point, are putting more money away for retirement.
A recent study by the Transamerica Center for Retirement Studies confirms this is true, but the difference isn’t as big as you might expect. The report shows 78% of baby boomers are saving for retirement, compared to 77% of Generation X and 71% of millennials. The numbers may be skewed by the fact that some baby boomers have already retired, but a 70-plus percent savings rate is pretty impressive for younger generations.
The message appears to be getting through: Americans need to save more for retirement. It’s heartening to see younger adults making this a priority, especially since many are also saddled with college student loan payments. Regardless of what life stage you’re in, saving regularly is an important habit. If you’re wondering which types of savings or investment vehicles are appropriate for your particular circumstances, we can help. Please give us a call to schedule a consultation.
Another reason the millennial generation may be saving more is that they’ve been squeezed out of the market for buying a house.2 Home values have increased significantly in certain areas of the country, giving some potential first-time homebuyers time to focus their resources on getting out of debt and saving and investing for retirement. This could be a silver lining when you consider the advantages of compounding interest over many decades.
However, millennials aren’t the only ones juggling debt. Americans over age 60 have amassed a total debt of more than $3 trillion, mostly on mortgages. But this generation also owes nearly $100 billion on student loans,3 suggesting people close to or in retirement are co-signing loans for children or grandchildren, or even paying off loans on their own education later in life.
Note that one of the provisions included in the SECURE Act, passed in late 2019, allows for withdrawals up to $10,000 from college savings 529 plans to help repay student loans.