Millennials’ Retirement Saving Behavior: Account Ownership and Balance

Abstract

Millennials is the largest population in the United States. Compared with their parents and grandparents, they have to shoulder more responsibilities to prepare financially for retirement. It is critical for Millennials to begin saving and investing for their retirements early in their careers. Few studies analyzed this generation's retirement saving behavior. Using data from the 2013 Survey of Consumer Finances, this study is among the first ones to examine the state of Millennials' retirement savings, including retirement account ownership and balance. Results show that only 37.2% of Millennials had any kind of account earmarked for retirement; and among those with a retirement account, the average accumulated amount was $21,333. Factors that affected retirement saving behavior included age; education; total household income and assets; job tenure; self-employment; having a retirement saving motive; having a defined benefit plan; overspending; and risk tolerance. This study provided initial insights that can help financial planners and educators, as well as policymakers understand Millennials' current retirement savings behavior and help them achieve a financially comfortable retirement.

An assessment of the effects of mental accounting on overspending behaviour: An empirical study

“…Schooley and Worden (2008) extend the wealth effect by showing that spending depends not only on the amount of wealth, but also on the types of assets that make up this wealth. Many researchers utilise Survey of Consumer Finances data set to explore household finances and debt issues (Crook, 2001; Lee & Kim, 2016a), saving behaviour (Fisher & Montalto, 2011), retirement savings (Lee & Kim, 2016b; Yao & Cheng, 2017), emergency fund savings (Bhargava & Lown, 2006), the use of mortgages and credit cards (Donou‐Adonsou & Basnet, 2019; Lee & Kim, 2018), borrowing behaviour (Yazdanparas & Alhenawi, 2017) and spending behaviour (Barbić, Lučić, & Chen, 2019; Basnet & Donou‐Adonsou, 2016; Chalise & Anong, 2017). The purpose of this study is to explore how overspending behaviour is affected by mental accounts of wealth, savings goals and expense forecasting.…”

“…Beyond sticking to the budget, saving for large purchases is another very effective way to control overspending behaviour (Shafir & Thaler, 2006). Yao and Cheng (2017) show that households that consulted with a financial planner before making saving and investment decisions are less likely to overspend. Additionally, some studies show that credit overspending may arise from a false perception of income and internet access.…”

“…To enjoy smooth consumption patterns over adulthood, consumers should be able to control overspending behaviours. In the area of overspending research, most studies focus on three research streams: the subject of overspending (i.e., consumption for hedonic goods, unessential spending and the lack of savings) (Håkansson, 2014); the overspending agent theories (i.e., the overspending patterns of specific demographic groups and the linkages between overspending and personality traits) (Bae et al., 1993; Yao & Cheng, 2017) and the analysis of overspending outcomes (Håkansson, 2014; Khare, 2013). To the best of our knowledge, very few studies examine how to control overspending behaviours.…”

Millennials’ Future Homeownership and the Role of Student Loan Debt

“…With historic stock returns of 10% from the S&P 500 Index and historic housing returns of 3.56%, homeownership as an investment is lacking, especially when also including the inflation rate of 2.9% (calculated using the 2016 Stocks, Bonds, Bills, and Inflation [SBBI] Yearbook written by Ibbotson, Grabowski, Harrington, & Nunes, 2016, with data provided by the Federal Reserve Bank of St. Louis, 2019). Yao and Cheng (2017) provide some support for this as they find homeownership has negative effects on retirement account ownership for the Millennial generation.…”

Capacitación y comportamiento financiero de la generación millennial en España

“…Asimismo, sus expectativas vitales y su forma de entender la vida provocan que esta generación aho-rre menos que las generaciones anteriores (Fernández-López, Vivel-Búa, Rey-Ares y Sixto-Puente, 2020). Los millennials ahorran poco con vistas a su jubilación (Mottola, 2014;Yao y Cheng, 2017), pues consideran que aún les queda mucho tiempo antes de abandonar el mercado laboral (Foster, Ng y Wee, 2015). Igualmente, la desconfianza que les inspiran las instituciones financieras por su papel en la crisis económica iniciada en el año 2008 (Lövgren y Magnusson, 2016) tampoco favorece su ahorro.…”