Millennials might not be doing as badly saving for retirement as everyone says

  • Millennials are known for their trouble saving, but some, at least, are holding onto six-figure retirement accounts.
  • The secret to their high balances is consistency: steadily saving over a long period of time.
  • To adopt their good habits, automate your savings, and rein in overspending.

If you’ve read the latest headlines, you know millennials get a mixed financial rap.

Some reports say they’re throwing their money away on avocado toast and dining out, while others claim they’re killing the earnings of restaurant chains by cooking at home more.

Whatever you believe about their financial habits, some millennials at least are sitting on six-figure retirement accounts. In a Fidelity Investments analysis of 59,000 millennials — those born between 1981 and 1997 — who have participated in their company’s 401(k) plan for 10 years, the average balance was $109,400 at the end of June 2017.

This isn’t thanks to rich parents. These savers can’t all work in investment banking. And odds are that at least some have student loan balances. Rather, the common thread — and secret to a fat 401(k) — is consistency.

Regular contributions add up

If you steadily save a reasonable portion of your income over a long period of time, you’re going to end up with a pile of money.

“Saving slowly and methodically while keeping expenses low will generally get you where you need to go,” says Timothy J. LaPean, a certified financial planner in Minneapolis. “You don’t need to shoot for the sky. All you need is a long series of incremental wins.”

The millennials in Fidelity’s analysis aren’t super savers. Less than a third have a total savings rate — which includes their contributions, plus company matching dollars — of 15% of their income or more.

Financial planners commonly use that 15% figure as a retirement savings goal. That means more than two-thirds of these millennials aren’t saving “enough” by most standards — or even close to it. The average contribution rate for the group, not including an employer match, is 7.5%.

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