Generation Y is ahead of the game when it comes to saving for retirement, according to the Principal Financial Group.
It found that 63 percent of millennial workers place saving for retirement as their top financial goal, followed by 48 percent who want to pay off their student loans and 42 percent who want to pay down credit card debt.
Eighty percent of millennial workers say they have a monthly budget and two-thirds have established an emergency fund, The Principal found
For its research, The Principal Knowledge Center surveyed retirement plan participants between the ages of 18 and 34.
“Millennial workers are clearly growing up and taking responsibility, with a passion and keen focus on their financial future. As the second- largest generation to the boomers and in control of more than $2 trillion in assets, these workers have very quickly become an important group to watch,” said Greg Burrows, senior vice president of retirement and investor services for The Principal. “This generation has seen parents cope with the recession and the impact of not saving enough. Based on those experiences, they are realistic about the challenges ahead, but optimistic because they plan to take charge of their own retirement nest egg.”
The majority of millennials (58 percent) say Social Security benefits will no longer exist by the time they reach retirement age, while another quarter of those surveyed believe Social Security will be around but with reduced benefits. Even without the help of the government, 79 percent of Gen Y workers feel confident they will be better off financially when they reach their parents’ current age.
Nearly two-thirds of those surveyed said they began saving for retirement at age 25, but 63 percent feel they still won’t be able to retire until after age 65, the survey found.
Twenty-two percent plan on retiring between ages 60 and 65. Even though they have started early, nearly half of those responding have not calculated the amount of money needed to retire or do not have a set goal. For those with a set goal, 34 percent want to save $1 million or more.
“While there seems to be a general sense that our generation isn’t being realistic about their financial future, this research shows we are savvy when it comes to money and investing. We’ve started saving earlier than past generations and recognize we may need to work longer in order to meet our financial goals,” said Jase Johnson, voice of the young consumer senior businesses strategist for The Principal. “One way for Gen Y to stay on track is by creating a financial plan and a calculated retirement income and savings goal.”
To achieve the American Dream, Gen Y workers estimate it will cost $3.1 million in today’s dollars. According to Gen Y workers, their version of the American Dream includes being financially secure (77 percent), having freedom (64 percent) and owning their own home (63 percent). Financial independence, marriage, and children top their list of dreams, followed by having a career and starting a family.
The Principal Financial Group is a global investment management firm offering retirement services, insurance solutions and asset management.