Mil­len­ni­als sock­ing away 15% of their salaries

Financial Mirror (Cyprus) - - FRONT PAGE -

Iron Man. Won­der Woman. Mil­len­nial Su­per Saver. He or she is an or­di­nary hu­man, 18 to 34, who saves at least 15% of his or her salary each year in a re­tire­ment sav­ings plan. The mis­sion: Save enough to re­tire com­fort­ably. Or at least re­tire, ac­cord­ing to Bloomberg.

An anal­y­sis by Fi­delity In­vest­ments of the 13 mln par­tic­i­pants in 401(k) plans in the U.S. that it ad­min­is­ters found close to 421,000 of these young “su­per savers,” as Fi­delity calls them, ac­count­ing for al­most 20% of the mil­len­nial savers in Fi­delity’s data­base. They save an av­er­age of 11% of their salaries; the other 4% comes from a com­pany match. The over­all av­er­age mil­len­nial con­tri­bu­tion rate is 6.6%, which rises to 11% with the com­pany match.

It helps that mil­len­nial su­per savers make a lot more money than their non­super-sav­ing peers. The av­er­age big saver in the 18-to-34 age range makes $73,000 a year. That’s not in­vest­ment banker money, but it’s nice com­pared with the $46,000 av­er­age for non-su­per­savers. Sav­ing can be tough for ev­ery­body, but sav­ing when you have a salary that’s 23% higher than the me­dian for your peers is less painful.

Gen X su­per savers, mean­while, had av­er­age salaries of $108,900, com­pared with $68,000 for Gen X-ers (ages 35 to 50) who didn’t save as much.

That salary dif­fer­ence en­ables those higher-earn­ing mil­len­ni­als to save about $4,900 more a year than their peers. And that, in turn, gets them higher av­er­age em­ployer match­ing con­tri­bu­tions. The av­er­age over­achiev­ing mil­len­nial saver has an ac­count bal­ance of $43,000, com­pared with $11,000 for non-su­per-saver peers.

Sav­ing 15% or more is some­thing to as­pire to. But start­ing to save early, and sav­ing con­sis­tently, can also take you a long way. Fi­delity found that mil­len­ni­als sav­ing less than 15% but sav­ing con­sis­tently for ten years had bal­ances of more than $100,000. And there are young work­ers earn­ing six-fig­ure salaries who don’t save at all. The key is be­ing proac­tive and stay­ing the course when mar­kets get chaotic.

The su­per-sav­ing ways of these mil­len­ni­als may have come from watch­ing the pain that the 2008-09 stock mar­ket tur­moil in­flicted on baby boomers. A 2014 sur­vey by T. Rowe Price found that mil­len­ni­als tend to have bet­ter fi­nan­cial habits than boomers. The Fi­delity data show that 80% of the mil­len­nial su­per-savers ac­tively en­rolled in their 401(k)s rather than be­ing au­to­mat­i­cally en­rolled when they joined the com­pany.

And how are these pre­co­cious savers in­vest­ing? Some 63% of the mil­len­nial big savers at Fi­delity aren’t in­vested in a way the com­pany con­sid­ers “age-ap­pro­pri­ate”—their port­fo­lios don’t hold be­tween 90% and 95% in eq­ui­ties.

About 10% are in­vested en­tirely in eq­ui­ties. That group isn’t unique in be­ing heav­ily into eq­ui­ties, ei­ther—about 60% of mil­len­ni­als are 100% in­vested in a tar­get-date fund, says Meghan Mur­phy, Fi­delity’s di­rec­tor of thought lead­er­ship for work­place re­tire­ment, and those funds are big on stocks. Fi­delity’s 2050 fund, for ex­am­ple, is about 94% in eq­ui­ties.

It’s not crazy to have such a high eq­uity weight­ing at a young age, if you’re clear on the risks you’re tak­ing and have a good emer­gency sav­ings fund so you won’t turn to your re­tire­ment fund for cash in a pinch.

You have been do­ing it, right?

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