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While Millennials are typically depicted as unprepared for the future, Bank of America Merrill Lynch’s survey found that employees aged 18 to 33 are enrolling in defined contribution plans faster than other generations, suggesting they do, indeed, “understand and appreciate the need to save for their future.”
The data is based on the behavior of the roughly 2.5 million people of all ages enrolled in Bank of America Merrill Lynch’s proprietary 401(k) business, or the 401(k) plans for businesses for which the bank serves as administrator or record keeper, at a total of $129 billion in assets.
In the first half of 2014, the number of first-time contributors increased overall by 37-percent. Among Millennials, it increased to 55-percent. The report notes that Gen-Y now makes up 20-percent more of the total contributor population than it did at this time in 2013. Much of this is driven by the ease of auto-enrollment and mobile financial technology.
Source: “Work in Retirement: Myths and Motivations" report
The findings come as little surprise when taken in consideration with another retirement study conducted by Merrill Lynch Retirement in partnership with Age Wave, which found that Millennials expect to rely on personal savings and income in retirement, as opposed to Baby Boomers and Gen-Xers who expect to depend on Social Security and pensions.
While older generations expect to have some sort of safety net available to them, younger workers are not as optimistic, instead determined to save for themselves. Michael Liersch, director of Behavior Finance for Bank of America Merrill Lynch, said while it feels counterintuitive to the dominant narrative about the coming-of-age generation, the fact that Millennials are taking control of their own futures is actually quite empowering.
“There are misperceptions out there,” says Liersch. “There are notions of immediate gratification, or ‘I don’t have enough to save,’ and we’re actually seeing the opposite, that Millennials do value investing, that immediate gratification doesn’t necessarily dominate in terms of their savings decisions and investing decisions.”
In fact, in terms of how they want to accomplish their retirement and investment goals, Millennial values are quite aligned with those of their parents.
“It differs based on experience, based on what they’re trying to accomplish, their goals,” says Liersch, rather than on any generational divide.
If anything, uncertainty about what the future is driving Generation Y to be more conscious about their future financial prospects and well-being.
“They do recognize, which is frankly empowering, that the accountability is going to be on them for their future,” he says. “Millennials are much more engaged and interested in understanding how to get where they need to go, from a financial perspective … that’s really exciting.”
While the data applies only to Millennials who are employed, Liersch says the data suggests given the opportunity, most people would be receptive to enrolling in defined contribution plans and making other retirement investments.
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