In my role at Fidelity, I’m often asked if Millennials are getting the message that they need to save for retirement, as most employers no longer offer Defined Benefit pension plans, and for the vast majority defined contribution plans are the only option.  Ten years ago, my answer was “some are, but most are not.” However, new findings by the Stanford Center on Longevity in their new report “The Shifting Life Milestones across Ages: A Matter of Preference or Circumstance?” reveals that today’s Millennials are well aware of the need to start saving early, and Fidelity’s database of 16 million 401(k) participants supports this finding.

“Millennials were significantly more likely than older cohorts to start saving for retirement by 25.”

The Stanford Center on Longevity’s study focused on the age at which people wanted to achieve certain life milestones and compared it to the age when they actually reached the milestone.  The five milestones they looked at were starting a full-time job, saving for retirement, getting married, buying a home and starting a family.  The study found that when it comes to starting a full-time job, getting married, buying a home or starting a family each generation has wanted to achieve these milestones at relatively similar ages. However, the most striking finding that the study revealed was the age at which they start saving for retirement. Today’s younger generations ideally want to start saving for retirement at an earlier age than previous generations. In fact, Millennials said they wanted to start saving for retirement at age 22, a full 2-3 years younger than today’s older adults reported (aged 65+). But it’s not just savings intentions that differentiate the generations—their actual savings behaviors follow a similar pattern: Millennials were significantly more likely than older cohorts to start saving for retirement by 25. This suggests that Millennials are not only getting the message that saving for retirement is critical, but they’re acting on it, too.

Fidelity’s 401(k) record-kept data supports this trend. In 2007, less than half (45%) of workers in their twenties participated in 401(K) plans. Today, that figure is 58%–a 28% increase.  Much of the increase in younger generations saving for retirement at earlier ages can be attributed to many employers automatically enrolling employees in their 401(k) plans.  In plans with automatic enrollment, 84% of employees in their twenties participate; by contrast, only 30% of twenty-somethings participate in plans without automatic enrollment.⁽¹⁾ It is truly encouraging to see that a workplace program such as 401(k) auto-enrollment is helping younger Americans achieve one of their life milestones at the age when they wanted to achieve it.

“Financial Wellness programs…may help close the gap between when people ideally want to buy a home versus when they actually do.”

Saving for retirement is necessary for financial security in later life, but financial security in the working years of life requires a different and broader set of actions. We’ve all heard the statistics about the state of Americans’ finances, and it’s not a pretty picture. Based on a recent Fidelity survey, nearly two-thirds of people don’t have enough emergency savings, half carry credit card debt, and half are spending at least as much as they earn every month.⁽²⁾ Many employers are tackling these issues head-on by implementing Workplace Financial Wellness programs, which are geared towards helping employees with debt, budgeting and saving.  Programs such as these could help people achieve life milestones closer to when they want to reach them.  For example, buying a home is virtually impossible without sufficient savings and credit for a down payment and mortgage, respectively. It is perhaps not surprising, then, that home ownership showed the biggest gap between people’s ideal and actual age. Less than one-third of Millennials and Gen X bought a home by their ideal age. Whereas today’s older adults reported buying their first home within 1-2 years of their ideal age, the gap was a full 7 years for Gen X.⁽³⁾ This finding reinforces why Financial Wellness programs are quickly becoming a critical part of an employer’s benefit offering: if Financial Wellness programs can do for employees during their working years what auto enrollment has done for retirement, it may help close the gap between when people ideally want to buy a home versus when they actually do.

⁽¹⁾ Fidelity analysis of 22,300 corporate DC plans (including advisor-sold DC) and 15.3 M participants as of September 2017.

⁽²⁾ Fidelity Investments 2016 Financial Wellness Survey of more than 6,000 DC participants. Conducted by CMI Research, an independent third-party research firm. July 2016.

⁽³⁾ Stanford Center on Longevity; Shifting Life Milestones across Ages, 2018.

Views expressed are as of the date indicated and may change.  Unless otherwise noted, the opinions provided are those of Jeanne Thompson and not necessarily those of Fidelity Investments.