MONEY retirement planning

Half of Workers Are on Track to Retire Well—Here’s How to Join Them

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iStock

Save 15% of pay for 30 years and you will be fine, a new study shows. Save for longer, and it gets much easier.

The shift from traditional pensions to 401(k) plans hasn’t gone well for most workers. One in two U.S. households are destined for a lifestyle downgrade in retirement, data show, as guaranteed lifetime income from old-style pensions disappears. But new research finds that most families can stay on track to a comfortable retirement by regularly saving 15% of pay over 30 years. Start earlier, and you only need to put away 10%.

The news isn’t all bad if you’re starting late. Even folks past age 50 have time to adjust. But clearly those with the shortest windows to retirement have the steepest hill to climb—and probably need to start factoring in a longer working life and more austere retirement lifestyle right away.

The typical middle-income household headed by someone 50-plus, and with a projected retirement shortfall, would need to boost its savings rate by 29 percentage points to retire comfortably at age 65, according to the Center for Retirement Research at Boston College. That would mean saving, say, 39% of every paycheck instead of 10%.

Calling this savings rate “unrealistic,” researchers Alicia H. Munnell, Anthony Webb, and Wenliang Hou conclude in their paper, “A better strategy for these households would be to work longer and cut current and future consumption in order to reduce the required saving rate to a more feasible level.” One thing the paper does not mention is that one in 10 U.S. workers is limited or unable to work due to poor health—and those past age 65 are three times more likely to have this issue, according to the National Health Interview Survey.

On a cheerier note, younger middle-income workers currently on track to fall short of retirement income still have time to realize their dreams by boosting savings just 7 to 13 percentage points (the younger you are, the lower the savings rate needed), research shows. The impact of starting early and letting your savings compound over more years cannot be overstated.

The typical wage earner planning to retire at age 65 in 2040 would need to build a nest egg of $538,000, the paper states. By purchasing an immediate annuity, you would replace 34% of pre-retirement income. Social Security would replace 36% of pre-retirement income—in all giving the household 70% of pre-retirement income, which is considered an acceptable minimum level. To reach this savings goal this household would have to save 15% of every paycheck starting at age 35. But if the household planned to work to age 70—or started saving five years earlier—it would need to save just 6% of every paycheck.

In general, the typical middle-income household must save enough to produce a third of its retirement income. Low-income households need only get a quarter of retirement income from savings. High-income households (with a more expensive lifestyle) need to save enough to produce half their retirement income, the paper found.

Related links:

Why It’s Never Too Late to Fix Your Finances

The Amazing Result of Actually Trying to Save Money

 

MONEY Savings

Millennials Are Hoarding Cash Because They’re Smarter Than Their Parents

Cash under mattress
Zachary Scott—Getty Images

Sure, young adults could get higher returns by investing in stocks, but many have good reasons to stay safe in cash right now.

Another day another study about the short-comings of Millennials as investors. This time around, Bankrate.com weighs in—data from their latest Financial Security Index show that 39% of 18-29 year-olds choose cash as their preferred way to invest money they won’t touch for least 10 years. That’s three times the percentage that would choose stocks.

“These findings are troubling because Millennials need the returns of stocks to meet their retirement goals,” says Bankrate.com chief financial analyst Greg McBride. “They need to rethink the level of risk they need to take.”

Bankrate.com is not the only group trying to push Millennials out of cash and into stocks. Previous surveys have scolded young adults for “stashing cash under the mattress,” being as “financially conservative as the generation born during the Great Depression,” and more being “less trustful of others”—in particular financial institutions and Wall Street. (You can find these surveys here, here and here.)

These criticisms are way overblown. It’s simply not true that Millennials are uniquely averse to equities—many are investing in stocks, despite their responses to polls. As for cash holdings, keeping a portion of your portfolio liquid is simply common sense, though you can overdo it.

Here’s what’s really going on:

  1. Millennials are not much more risk averse than older generations. In the wake of the financial crisis, investors of all ages have been keeping more of their portfolios in cash—some 40% of assets on average, according to State Street’s research. Baby Boomers held the highest cash levels (43%), followed by Millennials (40%) and Gen X-ers (38%). That’s not a wide spread.
  2. Many Millennials do keep significant stakes in equities. This is especially true of those who hold jobs and have access to 401(k) plans. That’s because they save some 10% of pay on average in their 401(k)s, which is typically funneled into a target-date retirement fund. For someone in their 20s, the average target-date fund invests the bulk of its assets in stocks. Thanks to their early head start in investing, these young adults are an “emerging generation of super savers,” according to Catherine Collinson, president of the Transamerica Center for Retirement Studies.
  3. Young adults who lack jobs or 401(k)s need to keep more in cash. Most young people don’t have much in the way of financial cushion. The latest Survey of Consumer Finances found that the average household headed by someone age 35 or younger held only $5,500 in financial assets. That’s less than two months pay for someone earning $40,000 annually, barely enough for a rainy day fund, let alone a long-term investing portfolio. Besides, that cash may be earmarked for other short-term needs, such as student loan repayments (a top priority for many), rent, or more education to qualify for a better-paying job.

There’s no question that young adults will eventually have to funnel more money into stocks to meet their long-term right goals, so in that sense the surveys are right. But many are doing better than their parents did at their age—the typical Millennial starts saving at age 22 vs 35 for boomers. And if many young adults hold more in cash right now because they’re unsure about their job security or ability to pay the bills, there are worse moves to make. After all, it was overconfidence in the markets that led older generations into the financial crisis in the first place.

MONEY 401(k)s

Stock Gains (and Saving) Push 401(k)s to Record Highs

Staying the course has rarely paid off so well as average retirement account balances soar.

The financial crisis is so yesterday. Retirement savings accounts have never been plumper, according to a new survey of 401(k) plans and IRAs at Fidelity Investments.

At mid-year, the average 401(k) balance stood at a record $91,000, up nearly 13% from a year ago. The average IRA balance stood at $92,600, also a record, and up nearly 15% from the previous year.

These figures include all employees in a plan, even those in their first year of saving. Looking just at long-time savers the picture brightens further. Workers who had been active in a workplace retirement plan for at least 10 years had a record average balance of $246,200—a figure that has grown at an average annual rate of 15% for a decade.

Over the past year, the resurgent stock market accounted for 77% of the higher average balance in 401(k) plans, Fidelity said. Ongoing employer and employee contributions accounted for 23% of the gain. The typical worker socks away $9,590 a year—$6,050 from her own contributions and $3,540 from an employer match.

Of course, the financial crisis still weighs on many Americans. Employment has been an ongoing weak spot and wage growth has been all but non-existent. Meanwhile, those in or nearing retirement may have fallen short of their goals after losing a decade of market growth at just the wrong point in their savings cycle. Many had to sell while prices were down.

But the Fidelity data reinforces the value of steady savings over a long period. By contributing through thick and thin, savers were able to offset much of the portfolio damage from the crisis. They not only held firm and enjoyed the market’s robust recovery but also were buying shares when prices were low. They earned a spectacular return on new money put into stocks the last five years. In calendar year 2013 alone, the S&P 500 plus dividends rose 32%.

Despite continuing contributions, savings balances did not rise as fast as the S&P 500 due to plan fees, cash-outs and broad plan exposure to lower-return investments like bonds and cash. Roughly a third of job switchers do not roll over their plan savings; they take the money, often incurring taxes and penalties. The average 401(k) investor has 33% in fixed-income securities.

Related:

 

MONEY Shopping

Seriously, Here’s How You Know If You’re Addicted to Shopping

Woman with shopping bags
Peter Cade—Getty Images

For those who shop to relieve stress, "retail therapy" is no joke.

“It’s not just shopping, it’s retail therapy.”

As a bumper sticker or a joke between friends, this may be amusing. For those who shop to relieve stress, it’s not nearly so funny. Medicating or soothing painful feelings with money is no healthier a behavior than medicating with alcohol or food. When stressed or in difficult circumstances, some people drink, some people eat, and some people shop.

As a financial adviser, I’ve worked with several clients with extreme forms of this behavior, who described their spending clearly as an addiction. It gave them a physical “high” similar to that experienced by an alcoholic or drug addict. Like other addictions, it had destructive consequences, such as overwhelming debt, loss of life savings, ruined relationships, and even theft from family members or employers.

Using spending as a medicator does not always show up in such dramatic ways, however. Even people who seem to live moderately and manage money responsibly can be “therapy shoppers” who spend in order to make themselves feel better.

When I met Alexandra, for example, she was single, in her 40s, with a well-paying job and a substantial net worth. She was investing part of her income, was current on all her financial obligations, and had only a modest amount of debt. She was certainly not spending beyond her means or jeopardizing her future security. She didn’t appear to be in any financial difficulty.

When we looked at her budget, however, Alexandra was clearly uncomfortable with some of her spending habits. Instead of simply reassuring her that she was managing her money well and not overspending, I explored this issue with her. Eventually I brought up the possibility that she might be medicating her difficult emotions with spending. It was an “aha!” moment for her. She told me, “I’ve been doing that for years.”

Alexandra’s problem wasn’t the amount she spent. It was the reasons behind her spending. If she had a stressful day at work, she would go to the mall, in much the same way another person might stop at a bar for a couple of drinks on the way home. Shopping, finding bargains, and buying herself gifts were unthinking actions she used to soothe herself when she was upset.

She never stopped to ask herself whether she needed or even wanted the things she bought. She didn’t spend more than she could afford, but she was spending time as well as money unproductively. She was also cluttering her house and her life with clothes she didn’t wear, knickknacks she didn’t care about, and gadgets she didn’t use.

Once she realized the emotional reason for her shopping, Alexandra was able to find more constructive ways to deal with stress. She learned healthier responses to difficult days. Talking with a friend, writing in her journal, meditating, or taking a walk could serve the same purpose as a trip to the mall.

For Alexandra, simply recognizing that she was using shopping to soothe her emotions was enough to help her change. People with more deeply ingrained behavior might find change more difficult. In such cases, clients could benefit greatly from working with a financial therapist with the expertise to help them look at the emotions underlying their spending patterns.

The important point for a financial planner is to look beyond the numbers. The main issue isn’t whether a client’s “retail therapy” is affordable or whether it is causing serious financial difficulties. If a behavior is creating discomfort for clients, as it was for Alexandra, helping them explore what lies behind it can be a valuable service.

MONEY

5 Secrets to Saving for the Future While Enjoying Life Now

Piggy bank enjoying life in a field
iStock

A financial planner explains how to prepare for retirement while living the good life now.

Save? Spend? Or both?

In my work with younger clients, that’s one of the main conflicts I see: The desire to prepare for the future and save versus the impulse to live for the present and enjoy earnings now. People know that nobody is promised tomorrow, but they also don’t want to live out their retirement years with limited choices, or none at all.

So how can people strike a successful balance between these seemingly competing desires? Based on my work with financial planning clients, here’s my five-step plan:

  1. Understand your cash flow. I’m going to make a bold statement here: Nothing will affect your financial future more than your ability to understand your household cash flow. If you want more money to save for the future or to spend now, you have to understand your current spending patterns and habits to get there. Check in on your spending weekly; that takes far less time than a monthly review, and it’s easier to catch places you may have spent more than you planned. It’s easy to live lean for a week if you’ve overspent in a previous week. It’s a lot harder to catch up if you’ve been overspending for a month.
  2. Learn to say “no” by deciding on your “yes.” The clearer you are about what you want to do in the short and long term, the easier it is to make spending choices that you’ll be happy with when you look back at them. Before I married the woman who became my wife, I used to feel deprived if we weren’t going out to eat often. On our honeymoon, I discovered that what I really wanted to do was to travel the world with her. Once that became the big yes, I wasn’t depriving myself if I didn’t go out to eat. If I did go out to eat, I was depriving myself of what I really wanted, which was to travel more. That single idea helped me change my habits entirely and build up the money we needed to take a big trip every year.
  3. Limit your monthly bills. Eric Kies talks about Money Past, Money Present, and Money Future in his First Step Cash Management system. Money Past is all of the money you’ve agreed to spend at the beginning of the month — things like rent, utilities, and student loan payments. While buying a new car may not seem like a big deal if you think you can afford it, adding on a car loan to your Money Past comes with a major tradeoff: It limits your day-to-day spending (Money Present), and it cuts into your ability to save for the future as well (your Money Future). Be careful; I regularly see young couples adding to their Money Past bucket, limiting their present and future spending choices.
  4. Automate your savings for present and future goals. Chances are you get paid by direct deposit, and it’s easy to direct funds into multiple accounts. Beyond your basic emergency fund, I’ve seen clients have a lot of success in setting up multiple savings accounts to have balances grow for specific goals (a trip to Europe, for example, or a new car). This allows you to see the specific progress you’re making. The same concept applies for retirement plans at work. If you can save that money automatically before it reaches your bank account, you’re far more likely to continue saving those funds in the future and even to increase your contributions over time.
  5. Plan for spontaneity. This may sound contradictory, but I think it’s essential. Many people I’ve spoken to resist tracking their spending because it feels constraining. A good solution to this is to build in money that is purely for spontaneous spending. If you know there’s money in your budget that is there for the sole purpose of spending it, it protects the money that you’re saving into other accounts by providing an outlet for a spur-of-the-moment decision.

Follow these suggestions and you’ll soon find you have money for both your current needs and your long-term goals.

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H. Jude Boudreaux, CFP, is the founder of Upperline Financial Planning, a fee-only financial planning firm based in New Orleans. He is an adjunct professor at Loyola University New Orleans, a past president of the Financial Planning Association‘s NexGen community, and an advocate for new and alternative business models for the financial planning industry.

 

MONEY early retirement

How to Figure Out Your Real Cost of Living in Retirement

Your retirement savings “number” gets a lot of press. But your expense number is even more important, especially if you retire early.

Many financial advisors say you’ll need some fixed percent of your previous income in retirement—often 80% is considered “reasonable.” But that’s nonsense. What it costs you to live in retirement, or before, is not a function of how much you make! There are millionaires who live like college students, and college students who live like millionaires—for a while anyway, on credit.

Where are you on the lifestyle spectrum? To get serious about retirement planning, you’ve got to have an accurate picture of your monthly living expenses. You need to know your bare minimum or fixed expenses, your average or normal expenses, and your ideal expenses—allowing for some luxuries.

Spending is a personal area, so everyone’s pattern will be different. But on average the first phase of retirement is when you’re likely to spend the most, since you’re finally free to travel, dine out and enjoy other leisure activities. Among older Americans, average annual expenditures peaked at about $61,000 for those in the 45-54 year age range, according to the latest data from the Consumer Expenditures Survey. By ages 55-64, spending dipped to $56,000, and down again to $46,000 between ages 65 to 74. At 75 years and older, average spending was only $34,000, though health care expenses may spike up for many.

We are in our mid-50’s and live a modest but comfortable lifestyle, which currently costs us about $4,500 a month, in addition to housing. We rent a smaller, two-bedroom house (about $1,500 monthly), and share a single gas-efficient car ($370 a month, including gas, insurance and repairs). But we eat well, own some nice things, and have plenty of fun—mostly free or cheap outdoor activities. And our living expenses run about 25% above the national average for our age.

This past year we moved to our ideal retirement location. So we’ve had to spend a bit more than usual due to the relocation. But these have generally been one-time home or personal expenses—not recurring expenses that would inflate our lifestyle forever more.

Health care costs remain a concern, since we are too young for Medicare. Fortunately, I was able to get coverage through my wife’s retirement health plan, thanks to her former career as a public school teacher; we pay $1,100 a month on average for premiums, co-pays, deductibles and the like. That’s one of our larger expenses, but it is manageable, for now. (For more on our spending in early retirement, see my blog here.)

If you’re willing to live in a cheaper area, buy used, and eat simpler, you can probably live on much less than we do. On the other hand, if manicured retirement communities, luxury vehicles, and international travel are your idea of retirement living, you could need quite a bit more. In most surveys of consumer expenses, the biggest items are housing and transportation. So, if you want to optimize your retirement lifestyle, start with your home and vehicle.

Without a complete understanding of how much it costs you to live, your retirement planning can’t get off the ground. The best way to determine your expenses is to actually keep track of them for at least a year, as you approach retirement. You can record expenses using dedicated tools like Quicken on the desktop or Mint on the web, or you can use an electronic spreadsheet or paper journal.

As an engineer, tracking expenses was second nature to me. But what if you aren’t the detail-oriented type? You could estimate your expenses based on those government averages above, but in the long run you’ll need more accuracy to be confident about your own situation.

One approach is to sit down with your checking and credit card statements, and use them to estimate a monthly or annual amount for each important budget category. You can start with this short list: housing, transportation, food, health care, entertainment, and personal expenses. Just don’t forget those less-frequent items such as home and auto repairs, vacations, and property taxes!

Your retirement savings “number” gets a lot of press. But even more important than that is your expense number. Understanding your expenses is a critical stepping stone to building wealth and retiring comfortably. If you still don’t know where your money goes, why not get started today?

Darrow Kirkpatrick is a software engineer and author who lived frugally, invested successfully, and retired in 2011 at age 50. He writes regularly about saving, investing and retiring on his blog CanIRetireYet.com. This column appears monthly.

MONEY retirement income

Need Low-Risk Yield? CDs are Back in Fashion

Dollars and cents
Finnbarr Webster / Alamy

Retirees and other people desperate to earn interest can find respectable deals on certificates of deposit.

Getting low-risk yield has been one of the toughest challenges for retirees ever since the financial meltdown of 2008-2009. Interest rates are near zero, and many retirees are nervous about bonds out of fear that rates might jump.

All of which leaves a simple question: How about a good old-fashioned certificate of deposit?

Retirees desperate for yield can find some respectable deals on CDs. The yields may not sound sexy, but there’s no risk to principal and the Federal Deposit Insurance Corporation protects accounts up to $250,000.

There’s nothing new about the higher rates on CDs compared with bonds. Banks, especially those without extensive retail branch networks, have long offered generous rates on CDs, mostly online, as an inexpensive way to attract deposits. It’s also a way for banks to bring in retail clients who can be cross-sold other higher-margin products.

But there’s an especially compelling case to be made for CDs in the current rate environment.

“For retirees, it’s the one corner of the investment world where you can get additional return without additional risk,” says Greg McBride, chief financial analyst for Bankrate.com.

The most aggressive banks will sell you a two-year CD with an annual percentage yield (APY) of 1.25%; compare that with current two-year Treasury rates, now at about 0.48%. Three-year CDs top out at 1.45%, compared with 0.92% on a Treasury of the same duration. If you want to go longer, five-year CDs top out over 2%.

Five or 10 years ago, the high rates came mainly from smaller no-name banks, but that’s not the case now. Some of the more aggressive offers currently come from big names like Synchrony Bank (formerly GE Capital Retail Bank), Barclays and CIT Bank. Bankrate.com lets you search and compare offers.

You could get higher yields on corporate or junk bonds. But they’re risky because the available yield isn’t adequate for the credit risk you need to take, argues Sam Lee, editor of Morningstar’s ETFInvestor newsletter.

“I’d rather be in a five-year CD than a bond fund taking on more duration or credit risk,” Lee says. “If rates do rise, you can lose a whole bunch of money on long-duration bonds — maybe 10 or 20% of your principal.”

The only risk you face locking in a longer CD — five years, for example — is the lost opportunity cost of obtaining a higher rate should rates jump. Lee likes that strategy.

“The interest rate sensitivity is very low, because you can always just get out and reinvest at a higher rate,” he says. “You’ll pay a bit of a penalty, but that is more than offset by the higher rate and value of the FDIC guarantee.”

McBride isn’t convinced rates will jump substantially anytime soon. “The long-awaited rising rate environment has yet to show itself — it might happen next year, or maybe not.”

Still, you should understand CD penalties in case you do need to make a move, because the terms can vary. The most common penalties for early withdrawal on a five-year CD are 6 or 12 months’ worth of interest, says McBride. “The terms can vary widely — some are assessed just on the amount you withdraw, others on the entire investment.”

If you’re worried about opportunity cost, some of the banks offering aggressive CD rates also have attractive savings accounts that let you make a move at any time – although some require a minimum level of deposit to qualify for the best rates. For example, Synchrony will pay you 0.95%. That’s not much less than the 1.1% it pays on a one-year CD – or the 1.2% for a two-year CD, for that matter.

The other option is a step-up CD that boosts your rate if interest rates rise in return for a lower initial rate. But those aren’t easy to find right now, McBride says. “We’ll see those become more prevalent if we get into a rising rate environment.”

No matter how long you go, Lee says, the implication for retirees is clear: Use CDs for the risk-free part of your portfolio and equities for whatever portion where some risk is acceptable.

Equities should help keep your overall portfolio returns substantially above the rate of inflation. The Consumer Price Index is up 2.1% for the 12 months ended in May.

“The U.S. stock market’s expected real [after-inflation] return right now is about 4%,” he says. “The expected inflation-adjusted yield on bonds right now is close to zero.”

MONEY Ask the Expert

How to Invest Your First 401(k)

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Robert A. Di Ieso, Jr.

Q: I just started my first job after college, and I want to sign up for my company’s 401(k). How should I invest it?

A: By saving in a 401(k) plan while you’re still in your 20s, you give yourself a huge advantage—you’ll actually need to save less money for retirement than someone who gets a later start, thanks to the power of compounding.

But figuring out how to invest that money can be daunting. According to a survey by Charles Schwab, half of people find explanations of their 401(k) investments more confusing than their health care benefits. Another 46% say they don’t know what their best investment choices are, while 34% say they feel a lot of stress about how to allocate their 401(k) dollars. The sheer number of fund choices can also be overwhelming: the typical 401(k) plan offers 19 investment options, according to the Plan Sponsor Council of America.

The good news is that when you’re starting out, you can keep it simple, says Jane Young, a fee-only financial planner at It’s Not Just Money in Colorado Springs. If your company offers a target-date fund (nearly 70% do), that can be a smart choice. With a target-date fund, you get an instant all-in-one asset mix that gradually shifts to become more conservative as you approach retirement. A 25-year-old worker who plans to retire at 65 might choose a 2055 target-date fund. It would keep the bulk of its assets in stocks, which provide growth but are more risky than bonds or cash. When you’re young, you can afford to keep more in stocks, since you have decades to recover from bear markets. (If you want to minimize risk, you could opt for a more conservative target-date fund—you don’t have to choose one with your retirement date.)

If your plan doesn’t offer a target-date option, build a portfolio yourself using core funds, such as an S&P 500 stock index fund and an intermediate-term bond fund, says Young. Look for the lowest-fee funds, which will allow more of your money go to work for you. (For more on selecting good, low-cost options, see how we choose our Money 50 list of recommended funds.) A reasonable mix for someone in their twenties: 20% of assets in a bond fund and 80% in stocks. In the equity portion of your portfolio, invest 50% in large company stocks, 25% in international stocks, and 25% in small and mid-size companies.

Ultimately how much you save for retirement is more important than how you invest it. So be sure to put away enough to get your employer’s full matching contribution. Keep increasing your savings rate until you are contributing 10% or more—some investing experts suggest that Millennials save at least 15% of income (including your company match) to ensure a secure retirement. And by diversifying and opting for low-cost funds, you will make the most of your 401(k) plan.

MONEY 401(k)s

Millennials (With Jobs) Are Super Saving Their Way to Retirement

Laptop with cord in shape of piggy bank
Atomic Imagery—Getty Images

Young adults are outpacing Baby Boomers and Gen X when it comes to getting a head start on their 401(k)s.

You may have heard that Millennials are taking saving more seriously than Gen X-ers and Baby Boomers did at their age. But their financial prospects look much worse, given student loan debts, high unemployment, and shaky entitlement programs.

No question, Millennials face steep challenges. But it turns out, twenty-something savers who managed to land jobs (some 74% of this age group) are doing even better than you might have thought—and they’ve built a huge head start toward retirement security.

Those are the findings of a just-released study by Transamerica Center for Retirement Studies, which surveyed more than 1,000 Millennials in the work force. “Millennials have seen what happened to their parents, many of whom lost their jobs and savings in the financial crisis—and they are taking steps to avoid a similar outcome,” says Catherine Collinson, president of the Transamerica center. “We’re seeing an emerging generation of retirement super savers.”

Millennials have also benefitted from the widespread adoption of 401(k) auto enrollment, automatic contribution hikes, and target date funds, Collinson says. Some 71% of Millennials who are offered a 401(k) end up joining their plan. By being enrolled into 401(k)s as soon as they start their jobs (unless they opt out), many Millennials are being nudged onto the retirement savings path sooner than previous generations.

How much sooner? Some 70% of Millennials started saving for retirement at an unprecedented young age, just 22, the survey found. By contrast, the average Boomer began saving at age 35, while Gen Xers got started at 27.

Transamerica’s findings show that Millennials are contributing an average 8% of salary to their 401(k) plans; adding an employee match, they’re stashing a solid 10% of income into their accounts. Those findings echo earlier surveys of young adults, which have found that Millennials are saving more.

Those contribution rates are especially impressive, given that Gen X savers are putting in just 7% of pay before the match on average. Boomers are saving at a higher rate, 10% before the match, but they also have higher pay on average and are facing a looming retirement date. Some 27% of Millennials also said they raised the amount they contributed in the past 12 months vs. just 7% who decreased it.

Thanks to this early savings start, Millennials have amassed an average $32,000 in their 401(k) accounts, according to Transamerica. And unlike older generations they are relying heavily on professional advice to invest their money—some 62% use a managed account or target date fund, vs just 47% of Boomers and 56% of Gen X-ers.

Of course, most young adults have plenty of shorter-term financial worries. Some 27% say their top priority is covering basic living experiences, and 27% say they want to pay off debt. Only 16% listed saving for retirement as a top concern. Complicating matters, three in 10 expect to provide support for their aging parents or other family members.

Even so, Millennials are optimistic about their retirement prospects. A whopping 60% expect to retire at age 65 or sooner. That’s a stark contrast to the majority of Baby Boomers (65%) and Gen X (54%), who plan to work past retirement or never retire. But Millennials share the expectations of older generations in other ways—half plan to work the job in retirement, either full time or part time. When it comes to staying busy in retirement, there’s not much of a generation gap.

MONEY Aging

Why It’s Never Too Late to Fix Your Finances

Those over 50 may become less sharp, but a little personal finance instruction can make a huge difference in their financial security.

When we speak of financial education today, in most cases we are referring to the broad, global effort to teach students how to stay out of debt and begin to save for retirement. But what about those who already have debts and may already be retired?

Clearly, we should teach them too. It’s never too late to improve your financial standing—and unlike financial education among the young, elders exposed to basic planning strategies adopt them readily, new research shows. This underscores the sweeping need for programs that address financial understanding at all ages and why even folks well past their saving years may still have time to get it right.

Last year, AARP Foundation and Charles Schwab Foundation completed a 15-month trial of financial instruction designed specifically for low-income people past the age of 50. After just six months of training, the subjects exhibited significant improvement in things like budgeting, saving, investing, managing debt and goal setting.

For example, only 42% of participants had at least one financial goal at the start of the program and 63% had set at least one financial goal after six months in the program. The rate of those spending more than they earned fell by a third and 35% had paid down debt. Many had begun to track spending and stop overdrawing accounts and paying late fees.

Participants saying they were “very worried” about money dropped to 14% from 22%; those saying they were “not very/not at all worried” jumped to 42% from 34%. These are remarkable gains in such a short period and among such a generally disadvantaged group. Half in the group had saved less than $10,000 and average income was about $35,000.

The research suggests that the 50-plus set can make big strides toward a secure financial life with some instruction. It jibes with other reports illustrating the value of financial inclusion for the unbanked millions and how a higher degree of personal financial ability might even save our way of life for everyone.

But let’s be clear: this isn’t just a way for low-income households to improve their lot. Plenty middle-class and even affluent households have a savings problem. And as we age we tend to make poorer money decisions regardless of our net worth. So it’s nice to see the financial education effort move beyond the classroom—increasingly to places of employment as part of benefits counseling and now, maybe, to community centers and retirement villages where willing adults can find it’s never too late to learn something new and feel good about their finances.

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