I Know I Need To Save For Retirement. I Can’t.

This generation has other long-term goals when it comes to their finances.

In February 1967, the personal savings rate for American workers was 12.4%. In February 2017, the personal savings rate was5.6%.

With lowered earnings, higher cost of living, and increasing levels of debt, American workers are finding it more difficult to save money.

Despite this, millennials are still saving where they can. More than 30% of Americans ages 18 to 26 have enoughsaved to cover three to five months of living expenses. Arguably, millennials are better savers than previous generations. According to a 2017 Bankrate.com survey, on average, millennials are saving 19% of their annual income, compared to the 14% saved by Gen X and baby boomers.

However, the how and why of millennial savings differs from past generations. And nowhere is that clearer than in how millennials view retirement plans.

Saving To Retire? Or Saving To Maintain?

Although the number of 401(k) accounts opened by millennials continues to rise thanks, in part, to employer auto-enrollmenta 2016 WellsFargo poll of working millennials found 52% were concerned stock market volatility would impact their 401(k) plans.

A lack of confidence in the long-term yield of their 401(k) plans combined with the uncertainfuture of Social Securitymotivates millennials to rely on personalsavings for the future.

But whereas retirement might be on the mind of young adults, that doesn’t mean it’s a top priority for what and where we designate our savings.

For example, 22-year-old Natalie Freitag lives in Indianapolis, IN, and attends IUPUI graduate school. She works at an occupational therapy clinic to support herself while obtaining her master’s degree and regularly puts money into a personal savingsaccount.

I try to keep the amount I put into savings consistent, but sometimes I have to put in lower amounts because of the cost of living here, she says. I designate the money for emergencies, mostly.

Freitag has not officially opened an account designated for retirement savings but the need for one is on her mind.

Retirement savings would probably be third on my priority list, she says. Paying off my student debt and living expenses come before saving for retirement.

Freitag does aspire to retire at some point, but a 2017 study by Merrill Lynch shows only 37% of millennialsare saving for that milestone. The rest reported saving to maintain or achieve their desired lifestyle.

I just want to be able to pay my bills without struggling and hopefully travel a little bit, Freitagsays. Mostly, I want to be able to afford my living without going into debt.

Will Whitten, a 20-year-old sales representative for United Coating Technologies in South Bend, IN, regularly dedicates approximately 25% of his monthly income to a savings account. He also holds a 401(k) account he plans to access by age 65.

I’m working hard and saving now so when I’m older I can relax or go on a trip if I want, he says.

Whitten does not have a personal savings account designated to retirement savings alone. Instead, he says his savings account is for whatever emergencies happen.

I have a mindset of saving, he says. Nothing really comes before putting money away. I feel strongly that how I want to retire is how I want to retire.


The Importance Of Saving For What We Want

Because of automatic enrollment, younger members of the workforce are now opening 401(k) accounts and building retirement savings. However, not all employers offer this benefit, andnearly half of young adults do not have the ability to participate in retirement plans.

Accumulated debt combined with living expenses and other saving priorities means millennials do not feel they can afford to open and contribute to IRAs or set aside savings for the long-term.

So,some of my generation might not be able to retire. Or, they might retire much later than previous generations.

Millennials know the importance of saving. And we are more than aware of the debate regarding the future of Social Security. If the statistics hold true, I will be 40 when Social Security benefits are exhausted. Without this benefit, if I don’t have enough accumulated in a 401(k) or in a personal savings account, I won’t be retiring.

That’s not a worry for Jessica Tilley. The 22-year-old classical archaeology grad student at Florida State University has absolutely no aspirations to retire.

I’ll be doing what I love, she says. So I hope I’ll want to do that well past the age of retirement.

Tilley currently saves for unexpected expenses and you guessed it emergencies, but she also designates a portion of savings to travel. For her, it’s less about the long-term accumulation of wealth and more about having the fundsavailable to do what she wants when she wants.

I want to be able to have experiences, Tilley says. I want to be able to go wherever I want and not have to worry about being able to pay for it.

Traveling might seem like it shouldn’t be a priority for a generation unable to purchase a homeand too invested in avocado toast and gym memberships to concernitself with saving or other financial matters. Tilley addresses this stereotype.

If you think about the millennial generation, when we were creating a vision for who we want to be as adults, the housing market crashed everything crashed, the Florida State student says. We were trying to figure out whatadulthood was going to look like for us, and we saw all these things failing. We now want to have a life where we are going to be happy. Clearly, happiness doesn’t equal a mortgage.

Millennial interests are vast and varying. We differ from our parents in our aspirations and bring a new perspective to the table. Each millennial has different interests and different plans for their future.

For some, that might mean retirement, for others travel, and for even more just living comfortably and freely.

As a financial institution, help the young adults who don’t have 401(k)s, IRAs, or other retirement plans. Get to know them and support the future they envision for themselves.

What better institution to help with that than a member-owned credit union? In addition to the attractive social benefits they provide, credit unions can offer long- and short-term savings options to fit every millennial and their desired lifestyle.

As Tilley put it, We just want to see that our money goes toward things we know will make us happy.

July 27, 2017

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