Millennials and the Saving-Too-Little Myth

This isn’t another article about avocado toast, the delicious scapegoat to an entire generation’s money problems.

A trendy breakfast is unlikely to derail the retirement intentions of the millennial generation, said Albert “Pete” Kyle, Charles E. Smith Chair Professor of Finance. Millennials likely will do just fine in saving for retirement. For those who are unsure, he offers six sound money tips.

Many members of this generation (born between 1981 and 1996) came of working age in the grips of the Great Recession, and Kyle said they have been slower to invest than their predecessors and generally more distrustful of a financial system blamed for systemic abuses that contributed to the cause of the global crisis.

The established narrative about millennials is that they are saving less than previous generations did. It’s worrying, the narrative goes, as fewer and fewer companies offer defined benefit retirement plans.

In some cases, that narrative about millennials might be true, Kyle said. “But it’s not new. The idea that people aren’t saving enough, that’s been around since I was in my 20s and 30s. And it was completely wrong (then)."

Average incomes of seniors in the United States have grown higher relative to the average incomes of everybody else in the economy, he said. And though millennials are less likely to work for a company that offers a defined benefit pension plan, those perks were never ubiquitous.

Fewer than one-third of U.S. workers ever qualified for such programs, he said.

“And those are the types of professionals that nowadays will max out their 401(k)s,” he said. “And people who max out their 401(k)s will do fine in retirement if they work for a reasonable number of years.”

For most people, that means holding off on retirement until age 67 or later, he said. Longer life expectancy means larger savings requirements.