Those born between 1981 and 1996, otherwise known as Millennials, have long been unfairly accused of irresponsible financial habits. Yet contrary to popular belief, evidence suggests Millennials’ financial instincts are actually often superior to those of prior generations.
This argument gains strength with a recent report from Vanguard, the world’s largest provider of mutual funds. This report suggests that when it comes to retirement savings, Millennials generally outperform their elders. Vanguard compared pre-retirement income and savings at different income levels to the amounts households would need for a comfortable retirement. Surprisingly, it was found that, except for the lowest earners, Millennials are more on track to retire comfortably than Baby Boomers.
This disparity was especially noticeable at higher income levels; Millennials in the top income bracket were reported to be 22 percent ahead of their high-earning Baby Boomer counterparts. Generation X also fared better than Baby Boomers in retirement savings, albeit not as well as the Millennials.
While the stereotype of reckless spending on luxuries such as avocado toast persists, it’s worth noting that the shift in savings behaviors is likely due to policy changes. The automation of enrollment and increasing contributions to 401(k) plans by employers, alongside automatic retirement account enrollment (resulting in a 91 percent participation rate) may be driving Millennials’ financial successes.
Even as passive beneficiaries of these changes, Millennials emerge as prudent savers. To some, this might seem a long overdue acknowledgement, but given the often negative discourse surrounding the generation’s financial habits, it’s a development worth noting. Let’s keep an eye on this upward trend as stock market patterns unfold.
Written by Jonathan Wolf, civil litigator and author of Your Debt-Free JD. Any views expressed are solely his own. He can be reached at jon_wolf@hotmail.com.