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T. Rowe Price’s Retirement Saving & Spending Study revealed that a national sample of 1,505 millennials with 401(k)s have relatively good financial habits, particularly when compared with a national sample of 514 baby boomers with 401(k)s. While millennials are not saving at least 15 percent of their annual salary for retirement, as T. Rowe Price recommends, they recognize that saving for retirement is important and are interested in saving more.

More millennials than baby boomers track expenses carefully (75 percent vs. 64 percent) and stick to a budget (67 percent vs. 55 percent). And while baby boomers on average are saving a slightly higher percentage of their salary for retirement than millennials are saving, more millennials have increased their retirement savings within the past 12 months (40 percent vs. 21 percent). This suggests that they are acting in accordance with their financial priorities, as millennials ranked contributing to a 401(k) but below the match and paying down debt equally as their top priority.

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“It’s encouraging to learn that millennials are so receptive to saving for retirement and are generally practicing good financial habits,” said Anne Coveney, senior manager of Retirement Thought Leadership at T. Rowe Price. “These millennials are working for private sector corporations, with a median personal income of $57,000 and an average job tenure of five years. So their circumstances may be somewhat driving their behaviors. When they have the means to do the right thing, it appears that they often do.

“However, they are also being affected by the flat income environment, with median raises of only 3 percent over the past 12 months. Yet they are exhibiting financial discipline in managing their spending and are defying stereotypes that this generation is prone to spend-thrift, short-sighted thinking.”

“The differences between millennials and baby boomers have significant implications for retirement plan sponsors and advisers,” said Aimee DeCamillo, head of T. Rowe Price Retirement Plan Services, Inc. “Baby boomers have largely shaped the defined contribution system, but it’s clear that millennials think differently and are more comfortable being auto-enrolled at higher levels. Because millennials are the largest generation ever within the U.S. and are entering the workforce in large numbers, plan sponsors and advisors need to begin incorporating millennials’ preferences and practices into their workplace retirement plan designs. They are benefiting from retirement plan auto-services and want more of them.”

Millennials  vs. Baby Boomers

Millennials are saving nearly as much for retirement as baby boomers: Millennials are saving an average of 8 percent (median: 6 percent) of their annual salary for retirement, while baby boomers are saving an average of 9 percent (median: 8 percent).

But more millennials have increased their 401(k) savings this year compared with baby boomers:Almost double the percentage of millennials are saving a higher percentage of their income in 401(k) contributions in the past 12 months compared with baby boomers (40 percent vs. 21 percent).

More millennials wish their employers auto-enrolled them in 401(k)s at a higher savings rate: Of the millennials who were auto-enrolled in their employers’ 401(k) plans, 47 percent wish their employers had enrolled them at a higher contribution rate. However, only 34 percent of baby boomers who were auto-enrolled wish their employers had enrolled them a higher contribution rate.

Millennials are more likely than baby boomers to track expenses and budget: 75 percent of millennials track expenses carefully, while only 64 percent of baby boomers do the same. Similarly, 67 percent of millennials say they stick to a spending budget, compared with 55 percent of baby boomers.

Millennials want advice and are more likely to use robo-advisors: 58 percent of millennials say they would benefit from help managing spending and debt, compared with only 24 percent of baby boomers. Additionally, 38 percent of millennials have employed an advisor in the past five years, including 11 percent who have used robo-advisors. While about an equal percentage of baby boomers have employed an advisor, only 2 percent have used robo-advisors.

They fund emergencies differently: Millennials are more likely than baby boomers to seek the help of family and friends (55 percent vs. 17 percent) if faced with a sudden financial emergency. They are also more likely to use credit cards (57 percent vs. 43 percent).

Millennials are mostly savers

Millennials profess to live within their means and to save by any means necessary: 88 percent of millennials say they are pretty good at living within their means, and 67 percent say they save by any means necessary.

They are more comfortable saving extra money than spending it: 74 percent of millennials say they are more comfortable saving and investing extra money than spending it.

Their employers’ 401(k) matches largely drive saving behavior: 59 percent of millennials set their 401(k) contribution rate to take full advantage of their employers’ matches, and 31 percent set their contribution rate to take partial advantage of their employers’ matches.

Most are better off financially than their parents were at the same age: 72 percent of millennials say they are somewhat or much better off financially than their parents were at the same age.

Saving for retirement and paying down debt are equally important: When asked to rank their financial priorities, about the same percentage of millennials identified contributing to their 401(k)s but below the match (27 percent) as their top priority as those who identified paying down debt (28 percent).

Most millennials expect Social Security to go bankrupt before they retire: 60 percent of millennials agree with the statement, “I expect Social Security to go bankrupt before I retire.”

401(k) auto features work

Millennials are satisfied with auto-enrollment: Of the millennials who were auto-enrolled in their 401(k) plans (20 percent), 79 percent are satisfied that their employers automatically enrolled them into their 401(k) plans.

Auto-enrollment rates can be set higher: The average default contribution rate for millennials who were auto-enrolled is 3 percent. However, millennials say they would not opt out until the average default contribution is 6 percent. In fact, more than a quarter (27 percent) say they would not opt out until the default contribution was 10 percent or higher.

Millennials want their employers’ full contribution match: 80 percent of millennials who were auto-enrolled into their 401(k) say that their employers should set the auto-enrollment contribution rate high enough to take full advantage of the company’s 401(k) match.

But some are reluctant to save at higher rates: 32 percent of millennials who were auto-enrolled at 1 percent would say they would opt out at 2 percent. Similarly, 38 percent of millennials who were auto-enrolled at 2 percent say they would opt out at 3 percent.

Understanding of target date funds

Millennials understand that target date funds hold a mix of asset classes: Of the millennials who invest in target date funds (47 percent), 79 percent understand that these funds hold a mix of asset classes that change over time.

But they may not have a full appreciation of all risks: 68 percent of millennials who invest in target date funds agree with the statement, “Target date funds are usually less risky than balanced funds.” While the target date funds held by baby boomers approaching retirement may look more like balanced funds, millennials most likely have higher equity allocations in the target date funds when compared with a balanced fund. This would potentially subject them to more market risk and volatility.

And they do not understand that these funds offer one-stop diversification: 78 percent of millennials with target date funds agree with the statement, “It’s better to hold additional funds in your 401(k) than just a target date fund.” Given that target date funds often hold over a dozen mutual funds investing in different asset classes, holding additional funds can create overlap and reduce diversification.

Who is not saving in their 401(k) plan?

Women are less likely to save in 401(k)s: The survey also included a separate sample of 255 millennials who are eligible to participate in 401(k)s but are not, and 68 percent of the non-savers are women. Within the sample of millennials who are saving in their 401(k)s, only 41 percent of savers are women.

And when they do save, they save less than men: The average 401(k) balance for women participating in their 401(k) is $38,000 (median: $11,000), compared with men, who have an average balance of $74,000 (median: $22,000). Additionally, women are contributing an average of 7.2 percent (median: 5 percent) of their annual salary to their 401(k), compared with men, who contributing an average of 8.4 percent (median: 7 percent).

Non-savers make less money and have more student debt: The median personal income of the millennials who are not participating in their 401(k)s, including both men and women, is $28,000, compared with $57,000 within the sample of millennials that are saving in their 401(k)s. They are also more likely to have student loan balances (66 percent), and their median student debt is $22,000. In contrast, among the savers, fewer have student loan balances (51 percent), and their median student debt is $16,000.

Their educational attainment is the same as those who are saving: 41 percent of the non-savers, including both men and women, have obtained a four-year college degree or more, compared with 42 percent of the millennials who are saving.

It is difficult for non-savers to meet their monthly expenses: 39 percent have trouble meeting monthly expenses. And only 54 percent are more comfortable saving and investing than spending.(Based on those who very or somewhat agree that these statements describe them when it comes to money).

About the survey

This research is based on online interviews with workers and retirees. This includes 3,026 working adults age 18+ who are currently contributing to a 401(k) plan or are eligible to contribute and have a balance with their current employer of $1,000 or more. Additionally, 255 millennials (ages 18–33) who are eligible for a 401(k) at their current employer but not contributing and do not have a balance in that 401(k) were surveyed. Retirees are represented by 1,027 adults who have retired in the past one to five years and who have a Rollover IRA or an account balance in a left-in-plan 401(k) plan. Interviewing was conducted during February 19 through March 25, 2015. All three samples are subject to a margin of error of just under 3 percent.