Millennial money has always been under the scanner – irrespective of whether it has been about concerns regarding their saving habits or retirement planning. However, it seems that 2017 is going to spell a fresh start for them. Let us explore why it is so.
The Natixis 2016 Retirement Plan Participant Study
As per the Natixis 2016 Retirement Plan Participant Study the average millennial, who has a defined contribution plan had actually starting saving from the age of 23. Needless to say, the defined contribution plan that we’re talking about here commonly refers to 401(k). The number (the age mentioned here) is equivalent to 31 years for Baby Boomers and 27 years for Generation X. Now, who actually can deny the benefits of these extra years’ savings? Going by the expected market returns, a person’s average salary (hikes included) and his deferral, it might as well be said the Millennial stands to retire with around $600,000 dollars.
Why they should save more
However, it has been opined that though millennials are saving early, they aren’t saving enough. While it has been found out that around 66% of them give around 1 to 5%of their salaries to the retirement plan of their company, the figure needs to be somewhere around 10%.
Millennials surveyed by Natixis think that they would need least something around $869,662 when they retire. The numbers should ideally increase given the chances of inflation in the next 40 years, illnesses or other inabilities to work or a major market correction.
If there is marked inflation in the next 40 years then let us tell you that $869,662 will not really be enough of purchasing power.
Don’t rule out chances of a possible market correction just before you’re about to return as well. With around ten to fifteen per cent decline in your portfolio you wouldn’t really be happy even if your portfolio is worth a million dollars!
Then there are these chances of developing diseases like diabetes or any other chronic illness. What happens when you’re battling with these health irregularities? Your healthcare cost increases!