With financial security as passion number one and saving for retirement topping the list of financial goals, Gen Y workers are making plans for a brighter financial future according to new research from the Principal Financial Group®.
When setting financial goals, saving for retirement came out on top for millennial workers (63 percent) followed by paying off student loans (48 percent) and paying down credit card debt (42 percent). These younger workers report taking action and positive strides towards making their goals a reality. Eighty percent say they have a monthly budget and two-thirds have established an emergency savings fund.
This is very good news for businesses that now offer a talent management and development tract for these new employees. If treated well, this group will be more prone to stay than hop around from job to job with goals like these.
The Principal Knowledge Center surveyed retirement plan participants ages 18-34 as part of a company initiative, which focuses specifically on this generational segment.
“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, Gen Y workers (79 percent) feel confident they will be better off financially when they reach their parents’ current age.
Saving Earlier, Working Later
Almost two-thirds (65 percent) of those responding began saving for retirement at age 25, yet even by starting early, nearly two-thirds (63 percent) plan to retire after age 65. Another quarter (22 percent) plan on retiring between ages 60-65. Even though they have started early, nearly half of those responding (44 percent) have not calculated the amount of money needed to retire or do not have a set goal. For those with a set goal, over a third (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 business 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.”
Putting a Price on American Dream
In order 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.
Reaching Younger Consumers
This Principal Financial Group Gen Y study was conducted online within the United States between September 9 and September 18, 2013 among 591 employees. Ages for participants ranged from 18-34. Those participating in the survey work for a company that currently has a workplace retirement plan with the Principal Financial Group.