58% of Millennials Actively Saving For Retirement; Average of $26,475 Saved

Millennials catch a lot of heat these days for the numerous things they do wrong. So the question remains, does this generation get anything right?

Well, according to a new LendEDU study, they might be getting at least one thing right: saving for retirement.

Through surveying 1,000 Americans aged 23 to 38, we found that the majority of the largest living generation have already stowed away a considerable amount of money – that will continue to compound – in preparation for the golden years.

But, what about investing outside of retirement saving? While millennials could be more actively involved in the market, our survey data also revealed that this generation still greatly favors traditional financial advisors over robo-advisors, dispelling a common narrative.

The goal of this particular study was to capture a broad snapshot of millennial investing habits, from retirement savings to personal stock plays. The data was further broken down by income and age in order to more clearly define the finance spectrum that exists for millennials.

Continue reading to see the key findings of our survey or click here to jump to the full survey results.

Observations & Analysis

58% of Millennials Are Saving For Retirement Via Investing Account; $26,475 is Average Amount Saved

In the beginning of the survey we asked millennial respondents if they are actively saving for retirement through an investment account such as a 401(k) or Individual Retirement Account (IRA).

As the graphic above depicts, more than half of millennials, 58%, are currently saving for their retirement through an investment account like a 401(k).

Interestingly, income appeared to have the biggest impact on if a millennial was saving for retirement as the result range (34% to 77%) was wider when the results were broken down by income compared to when the same answers were classified by age (41% to 65%).

However, age was definitely the biggest factor in terms of how much the average millennial was stowing away for retirement.

Age holds much more weight in determining how much millennials have saved for retirement rather than individual annual income. This could be attributed to two things:

Compound Interest

First, is the power of compounding interest. The sooner one begins to save, the greater that power becomes. Compound interest is the interest generated based on the initial principal amount, in addition to the interest accumulated over time. Essentially, an investor is earning interest on interest, which can lead to a rapid snowballing of wealth.

Time is the greatest ammunition for compound interest, not amount saved each month. For example, Susie invests $5,000 per year into her 401(k) from the age of 23 until the age of 33, at which point she stops with a total of $50,000 invested. On the other hand, similarly-aged Bobby also invests $5,000 per year, but Bobby starts saving at age 33 and continues until he retires at age 63 with a total of $150,000 invested.

Assuming both Bobby and Susie’s 401(k) has the same annual investment return of 7%, Susie will have $602,070 in her account while Bobby will have $540,741 in his account when they both reach age 63. Although Bobby invested for 20 extra years, Susie is reaping the benefits of compound interest as her investment return in those first 10 years is snowballing rapidly.

High-Earning Millennials Not Contributing as High of a Percentage of Income

It was a tad surprising that there was such little disparity in average amount saved for retirement when the results were segmented by income level.

Between low-income millennials and high-income millennials, the average amount put away for retirement only differed by $188. Considering that the groups were separated in annual income by $50,000, one would think wealthier millennials would have a bit more stowed in their 401(k) or IRA.

It is entirely possible that high-earning millennials are not contributing a high enough percentage of their recurring paycheck proportional to their individual annual income. Most financial planners recommend saving between 10% and 15% of annual income for retirement.

The Big Three For the Few Millennial Investors? Finance, Tech, & Healthcare

We also wanted to see if we could uncover any other millennial investing trends not specifically geared towards retirement.

We first asked millennials if they invested in the market through a personal brokerage account.

As a whole generation, millennials do not appear to be very keen on making personal plays in the stock market outside of retirement contributions. In not one instance, did more than half of any cohort indicate that they were investing in the market through a personal account.

For example, 30% of the overall respondent pool said they were personally invested, while 15% of low-income millennials were as well, which is not surprising as they may not have the additional income available. However, a mere 35% of older millennials aged 33 to 38 were making any type of Wall Street play.

This lack of involvement in the stock market could stem from a deep-seeded mistrust of Wall Street as millennials grew up in the midst of the 2008 financial crisis.

Millennial Money is Going to Three Main Sectors on Wall Street

Although there were few millennials that were personally investing in the stock market, those that were playing the stocks were incredibly consistent in their choices.

In nearly every breakdown of the results – overall, by age, and by income level – millennials were most heavily invested in financial stocks, followed by technology and healthcare.

Finance stock plays were overwhelmingly the most common investment amongst millennials across all income levels and age groups. As government regulations have been gone through a considerable rollback, financial stocks have prospered which spells healthy returns for millennial investors.

Additionally, it is none too surprising to see this generation so interested in gambling on tech stocks. Millennials have grown up as tech giants like Apple, Alphabet, and Facebook have become dominant players on Wall Street.

While millennial involvement in the stock market is minimal, the ones that are investing are seemingly making smart plays. One particular expert recommended that millennials buy into three sectors: finance, healthcare, and tech.

Despite the Narrative, Financial Advisor Use is Strong & Still Preferred Over Robo-Advisors

Overall, 21% of millennials indicated that they use a financial advisor to help them manage their finances.

When accounting for income level, 30% of high-income millennials use a financial advisor, while 21% of middle-income millennials do the same. Only 11% of low-income members of this generation said they use a financial advisor, likely due to a lack of funds to pay for advising fees.

Finally, 19% of younger millennials stated that they used a financial advisor, while 32% of middle-aged millennials and 35% of older millennials did the same.

While the numbers don’t exactly jump off the page, they are relatively strong when one considers that the same survey indicated scarcely any millennials are invested in the stock market outside of their retirement account.

And, the Vast Majority of Millennials Think Their Advisor is Worth It

In an even more promising result for traditional financial advisors, those millennials that do employ traditional financial advisors overwhelmingly believe they are worth the cost.

Throughout all breakdowns of the data, the lowest percentage of millennials that believed their financial advisor was worth the cost was 84%, and that belonged to low-income millennials. So, even those consumers that might be scraping buy to afford their advisor still believe they are getting good value for their money.

This all bodes well for traditional financial advisors, who have been battling uphill in recent times as technological advances have increasingly made the financial advising industry more automated and affordable. This should subsequently make paying high advisory fees for a traditional human advisor harder to justify.

And, there was one last bit of good news for those who work in the financial advisement space.

Millennials Still Want Human Advisors Over Robo-Advisors

As noted in the introduction, the common theme in 2019 is that human advisors are losing business to robo-advisors. However, our survey results displaying something quite different.

While 19% of millennials had no preference between a human advisor and a robo-advisor, only 16% opted for a robo-advisor, while 65% wanted the traditional financial advisor.

Furthermore, the data remained incredibly consistent relative to the overall results when age and income breakdowns were implemented.

While robo-advisors are certainly making headway and may continue to do so, human financial advisors should not worry too much as they are still much the preferred option for tech-savvy millennials. Even when it comes to data-driven investing, consumers still want that human touch. We also found similar trends in a previous survey we conducted.

Methodology

All of the data that can be found within this report derives from a survey commissioned by LendEDU and conducted online by Pollfish.

In total, 1,000 American millennials were surveyed for this particular survey. All respondents fell within the ages of 23 and 38, the millennial age range, according to Pew. Additionally, a quota was used to ensure we received a near even split of millennials between three income brackets. 340 millennials in the high-income bracket, which is an individual annual income bracket of $100,000 or more, were surveyed. 330 millennials in the middle-income bracket, which is an annual income between $50,000 and $99,999, were surveyed. Finally, 330 millennials in the lower-income bracket, which is an individual annual income of $49,999 or less, were surveyed. The income brackets are pre-established parameters set by Pollfish.

This particular survey was conducted over a two-day span, starting on March 1, 2019 and ending on March 2, 2019. All respondents were asked to answer all questions truthfully and to the best of their abilities.

Full Survey Results

Overall Results

The following survey was administered to 1,000 U.S. millennials (23-38)

(1) Are you actively saving for retirement through an investment account like a 401(k) or IRA?

• 58% of respondents answered “Yes”
• 40% of respondents answered “No”
• 2% of respondents answered “I’d rather not say.”

(2 — Asked only to those who answered “Yes” to Q1) How much do you already have saved for retirement through an investment account like a 401(k) or IRA?

• The average millennial has saved $26,475 for retirement through an investment account like a 401(k) or IRA.

(3) Do you invest in the market through a personal brokerage or investment account, excluding your retirement account (ex. 401(k), IRA, etc.)?

• 30% of respondents answered “Yes”
• 67% of respondents answered “No”
• 3% of respondents answered “I’d rather not say.”

(4 — Asked only to those who answered “Yes” to Q3) Which of the following sectors are you currently invested in? (Select all that apply)

• 29% of all investments were in “Financials (JP Morgan, Berkshire Hathaway, PayPal, etc.)”
• 11% of all investments were in “Healthcare (CVS, Johnson & Johnson, Centene, etc.)”
• 9% of all investments were in “Industrials (Caterpillar, Black & Decker, Waste Management, etc.)”
• 18% of all investments were in “Technology (Apple, Alphabet, Facebook, etc.)”
• 6% of all investments were in “Consumer Discretionary (Disney, AMC, United Continental, etc.)”
• 10% of all investments were in “Energy (Exxon, Chevron, BP, etc.)”
• 4% of all investments were in “Materials (Ball Corporation, Mosaic Company, Ecolab Inc., etc.)”
• 8% of all investments were in “Telecommunications (Verizon, AT&T, etc.)”
• 5% of all investments were in “Aerospace (Lockheed Martin, Boeing, etc.)”

(5) Do you currently use a financial advisor to help you manage your finances?

• 21% of respondents answered “Yes”
• 78% of respondents answered “No”
• 1% of respondents answered “I’d rather not say.”

(6 — Asked only to those who answered “Yes” to Q5) Do you believe that a financial advisor is worth the cost?

• 89% of respondents answered “Yes”
• 11% of respondents answered “No”

(7) Assuming identical costs, would you prefer to use a robo-advisor (a virtual financial advisor) or a human financial advisor?

• 16% of respondents answered “I would prefer to use a robo-advisor.”
• 65% of respondents answered “I would prefer to use a human financial advisor.”
• 19% of respondents answered “No preference”

Results Broken Down By Income Level

The following results were broken down almost evenly by three income levels:

• Low Income Millennials (Individual annual income of $49,999 or less)
• Middle Income Millennials (Individual annual income between $50,000 and $99,999)
• High Income Millennials (Individual annual income of $100,000 or more)

(1) Are you actively saving for retirement through an investment account like a 401(k) or IRA?

• Low Income Millennials
  • 34% answered “Yes”
  • 64% answered “No”
  • 2% answered “I’d rather not say.”
• Middle Income Millennials
  • 65% answered “Yes”
  • 33% answered “No”
  • 2% answered “I’d rather not say.”
• High Income Millennials
  • 77% answered “Yes”
  • 22% answered “No”
  • 1% answered “I’d rather not say.”

(2 — Asked only to those who answered “Yes” to Q1) How much do you already have saved for retirement through an investment account like a 401(k) or IRA?

• Low Income Millennials
  • The average low income millennial has saved $26,450 for retirement through an investment account like a 401(k) or IRA.
• Middle Income Millennials
  • The average middle income millennial has saved $26,523 for retirement through an investment account like a 401(k) or IRA.
• High Income Millennials
  • The average high income millennial has saved $26,638 for retirement through an investment account like a 401(k) or IRA.

(3) Do you invest in the market through a personal brokerage or investment account, excluding your retirement account (ex. 401(k), IRA, etc.)?

• Low Income Millennials
  • 15% answered “Yes”
  • 83% answered “No”
  • 2% answered “I’d rather not say.”
• Middle Income Millennials
  • 28% answered “Yes”
  • 69% answered “No”
  • 3% answered “I’d rather not say.”
• High Income Millennials
  • 48% answered “Yes”
  • 49% answered “No”
  • 3% answered “I’d rather not say.”

(4 — Asked only to those who answered “Yes” to Q3) Which of the following sectors are you currently invested in? (Select all that apply)

• Low Income Millennials
  • 31% of all investments were in “Financials”
  • 11% of all investments were in “Healthcare”
  • 10% of all investments were in “Industrials”
  • 17% of all investments were in “Technology”
  • 7% of all investments were in “Consumer Discretionary”
  • 8% of all investments were in “Energy”
  • 4% of all investments were in “Materials”
  • 6% of all investments were in “Telecommunications”
  • 6% of all investments were in “Aerospace”
• Middle Income Millennials
  • 33% of all investments were in “Financials”
  • 11% of all investments were in “Healthcare”
  • 10% of all investments were in “Industrials”
  • 18% of all investments were in “Technology”
  • 5% of all investments were in “Consumer Discretionary”
  • 9% of all investments were in “Energy”
  • 5% of all investments were in “Materials”
  • 7% of all investments were in “Telecommunications”
  • 2% of all investments were in “Aerospace”
• High Income Millennials
  • 27% of all investments were in “Financials”
  • 12% of all investments were in “Healthcare”
  • 9% of all investments were in “Industrials”
  • 18% of all investments were in “Technology”
  • 5% of all investments were in “Consumer Discretionary”
  • 11% of all investments were in “Energy”
  • 4% of all investments were in “Materials”
  • 9% of all investments were in “Telecommunications”
  • 5% of all investments were in “Aerospace”

(5) Do you currently use a financial advisor to help you manage your finances?

• Low Income Millennials
  • 11% answered “Yes”
  • 87% answered “No”
  • 2% answered “I’d rather not say.”
• Middle Income Millennials
  • 21% answered “Yes”
  • 78% answered “No”
  • 1% answered “I’d rather not say.”
• High Income Millennials
  • 30% answered “Yes”
  • 68% answered “No”
  • 2% answered “I’d rather not say.”

(6 — Asked only to those who answered “Yes” to Q5) Do you believe that a financial advisor is worth the cost?

• Low Income Millennials
  • 84% answered “Yes”
  • 16% answered “No”
• Middle Income Millennials
  • 88% answered “Yes”
  • 12% answered “No”
• High Income Millennials
  • 90% answered “Yes”
  • 10% answered “No”

(7) Assuming identical costs, would you prefer to use a robo-advisor (a virtual financial advisor) or a human financial advisor?

• Low Income Millennials
  • 14% answered “I would prefer to use a robo-advisor.”
  • 63% answered “I would prefer to use a human financial advisor.”
  • 23% answered “No preference”
• Middle Income Millennials
  • 15% answered “I would prefer to use a robo-advisor.”
  • 67% answered “I would prefer to use a human financial advisor.”
  • 18% answered “No preference”
• High Income Millennials
  • 18% answered “I would prefer to use a robo-advisor.”
  • 66% answered “I would prefer to use a human financial advisor.”
  • 16% answered “No preference”

Results Broken Down By Age

The following results were broken down by three age groups:

• Young Millennials (Ages 23-27)
• Middle Aged Millennials (Ages 28-32)
• Old Millennials (Ages 33-38)

(1) Are you actively saving for retirement through an investment account like a 401(k) or IRA?

• Young Millennials
  • 41% answered “Yes”
  • 56% answered “No”
  • 3% answered “I’d rather not say.”
• Middle Aged Millennials
  • 61% answered “Yes”
  • 37% answered “No”
  • 2% answered “I’d rather not say.”
• Old Millennials
  • 65% answered “Yes”
  • 34% answered “No”
  • 1% answered “I’d rather not say.”

(2 — Asked only to those who answered “Yes” to Q1) How much do you already have saved for retirement through an investment account like a 401(k) or IRA?

• Young Millennials
  • The average young millennial has saved $7,796 for retirement through an investment account like a 401(k) or IRA.
• Middle Aged Millennials
  • The average middle aged millennial has saved $21,375 for retirement through an investment account like a 401(k) or IRA.
• Old Millennials
  • The average old millennial has saved $39,787 for retirement through an investment account like a 401(k) or IRA.

(3) Do you invest in the market through a personal brokerage or investment account, excluding your retirement account (ex. 401(k), IRA, etc.)?

• Young Millennials
  • 19% answered “Yes”
  • 78% answered “No”
  • 3% answered “I’d rather not say”
• Middle Aged Millennials
  • 32% answered “Yes”
  • 65% answered “No”
  • 3% answered “I’d rather not say.”
• Old Millennials
  • 35% answered “Yes”
  • 63% answered “No”
  • 2% answered “I’d rather not say.”

(4 — Asked only to those who answered “Yes” to Q3) Which of the following sectors are you currently invested in? (Select all that apply)

• Young Millennials
  • 28% of all investments were in “Financials”
  • 15% of all investments were in “Healthcare”
  • 10% of investments were in “Industrials”
  • 15% of all investments were in “Technology”
  • 8% of all investments were in “Consumer Discretionary”
  • 8% of all investments were in “Energy”
  • 3% of all investments were in “Materials”
  • 10% of all investments were in “Telecommunications”
  • 3% of all investments were in “Aerospace”
• Middle Aged Millennials
  • 32% of all investments were in “Financials”
  • 10% of all investments were in “Healthcare”
  • 10% of all investments were in “Industrials”
  • 19% of all investments were in “Technology”
  • 4% of all investments were in “Consumer Discretionary”
  • 8% of all investments were in “Energy”
  • 4% of all investments were in “Materials”
  • 9% of all investments were in “Telecommunications”
  • 4% of all investments were in “Aerospace”
• Old Millennials
  • 27% of all investments were in “Financials”
  • 11% of all investments were in “Healthcare”
  • 9% of all investments were in “Industrials”
  • 19% of all investments were in “Technology”
  • 6% of all investments were in “Consumer Discretionary”
  • 12% of all investments were in “Energy”
  • 5% of all investments were in “Materials”
  • 7% of all investments were in “Telecommunications”
  • 5% of all investments were in “Aerospace”

(5) Do you currently use a financial advisor to help you manage your finances?

• Young Millennials
  • 20% answered “Yes”
  • 79% answered “No”
  • 1% answered “I’d rather not say.”
• Middle Aged Millennials
  • 22% answered “Yes”
  • 76% answered “No”
  • 2% answered “I’d rather not say.”
• Old Millennials
  • 20% answered “Yes”
  • 79% answered “No”
  • 1% answered “I’d rather not say.”

(6 – Asked only to those who answered “Yes” to Q5) Do you believe that a financial advisor is worth the cost?

• Young Millennials
  • 88% answered “Yes”
  • 12% answered “No”
• Middle Aged Millennials
  • 87% answered “Yes”
  • 13% answered “No”
• Old Millennials
  • 90% answered “Yes”
  • 10% answered “No”

(7) Assuming identical costs, would you prefer to use a robo-advisor (a virtual financial advisor) or a human advisor?

• Young Millennials
  • 14% answered “I would prefer to use a robo-advisor.”
  • 67% answered “I would prefer to use a human financial advisor.”
  • 19% answered “No preference”
• Middle Aged Millennials
  • 18% answered “I would prefer to use a robo-advisor.”
  • 63% answered “I would prefer to use a human financial advisor.”
  • 19% answered “No preference”
• Old Millennials
  • 15% answered “I would prefer to use a robo-advisor.”
  • 65% answered “I would prefer to use a human financial advisor.”
  • 20% answered “No preference”

See more of LendEDU’s Research