At a recent Capitol Hill briefing hosted by WISER, Wells Fargo released new research on the financial differences between Millennials and Boomers. The 2014 Wells Fargo Millennial Study surveyed more than 1,600 U.S. adults aged 22-33 (Millennials) and more than 1,500 U.S. adults aged 49-59 (Baby Boomers). The event also featured recently released results from the FINRA Investor Education Foundation’s 2012 National Financial Capability Study, which sampled 25,509 respondents age 18 and up, including 6,865 Millennials. Both studies found that Millennials are struggling with debt and saving for retirement. Here are some facts and findings from the research:
Millennials experienced the Great Recession early in their lives and careers, entering the workforce during a time of uncertainty. They had difficulty finding jobs and becoming financially stable, despite being the most educated generation in U.S. history.
This experience has taught Millennials to think about their financial future. Eighty-percent said they have learned to save for financial problems down the road, yet they still face serious financial concerns.
Half of Millennials are concerned about too much debt, and 42% say it is their “biggest financial concern currently.” Despite their concern, many are still taking on more debt, and 23% outspend their income. Most of this debt is accumulating in credit card debt, which represents 16% of Millennials’ overall debt. Student loans are also taking their toll. Millennials experienced large increases in education, and more of them are attending college and post-graduate schools than previous generations. Nearly one-third of Millennials said that paying off student loans is their top financial priority.
The result of this debt? Four in 10 Millennials (40%) feel overwhelmed by debt pressure. Only 23% of their parents’ generation feels this way.
It can be difficult to think about the future when you are overwhelmed by your current finances, which Millennials’ retirement savings habits demonstrate. Get tips on how to address your debt now.
Millennials are saving, as the Great Recession taught them, but only 55% of them are saving specifically for retirement. Most that are saving are doing so at low rates (1-5% of their income).
They also seem uncertain about how much to save and how important it is to save for retirement starting now. In responses to financial literacy questions, Millennials did great on questions about interest rates, but poorly on those focusing on inflation rates. This lack of financial literacy could have long-term consequences.
Additionally, 40% of Millennials have “no idea” how much money they need in retirement, while 31% say that they will need under $1 million. Without an understanding of inflation, Millennials may save less than they actually will need in retirement.
WISER offers a retirement calculator that includes an inflation rate adjustment.
Both studies found disparities between genders. Millennial men are earning more ($77,000) than women ($56,000) and therefore are saving at higher rates (61% compared to 50%). Women also have lower financial literacy levels, are less likely to have emergency savings, and are less likely to hold investment accounts.
Similar to women in the Baby Boomer generation, Millennial women also report lower levels of confidence in being able to meet their financial goals. In general, Millennials are optimistic about their financial futures. When broken out by gender, however, males are more confident. Only 63% of Millennial women are confident they will be able to save enough for their desired lifestyle in the future, compared to 80% of men. Women are also more likely to feel overwhelmed by their finances (45%) than men (33%).
Feeling overwhelmed yourself? Here are 5 actions women can take to help save for retirement.