CLIENT ACCOUNTS

Recently Viewed Accounts

You have no recently viewed accounts.

Select your location

Who are you ?

Select another location

Wer bist du ?

Wählen Sie einen anderen Ort

Qui êtes vous ?

Sélectionnez un autre emplacement

Qui êtes vous ?

Sélectionnez un autre emplacement

Qui êtes vous ?

Sélectionnez un autre emplacement

Wer bist du ?

Wählen Sie einen anderen Ort

Wer bist du ?

Wählen Sie einen anderen Ort

Qui êtes vous ?

Sélectionnez un autre emplacement

Wer bist du ?

Wählen Sie einen anderen Ort

Qui êtes vous ?

Sélectionnez un autre emplacement

Who are you ?

Select another location

Who are you ?

RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 1, 2 OR 754

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

Categories
Millennials
Do plan sponsors have a millennial problem?
Sue Walton
Senior Retirement Strategist

Millennials are no longer fresh-faced folks just out of college. Some of them are 40 years old, many with kids and a mortgage – and running out of time to get a healthy start on saving for retirement. In that regard, many of them need plan sponsors’ help. This generation seems overconfident about their retirement readiness, faces serious financial challenges and could use some financial guidance.


Capital Group’s latest Wisdom of Experience survey of 1,200 retail investors found some interesting trends across generations. The survey reveals that millennials are far more confident than the previous generation: 74% of millennials expect to reach their retirement goals, while their Generation X predecessors are the least confident, with 37% indicating they are not confident they will reach their retirement goals.


Millennials are more likely than other age groups to be confident in reaching their goals


This bar chart shows confidence levels in reaching retirement goals across the millennial, Gen X and baby boomer generations, as well as total confidence levels for all three. The first column shows that 68% of all three generations are confident in reaching their retirement goals, with 10% not at all confident, 18% not very confident, 37% somewhat confident, 25% extremely confident and 5% reached or exceeded their goals. The second column shows that overall, 74% of millennials are confident in reaching their retirement goals, with 7% not at all confident, 13% not very confident, 39% somewhat confident, 29% extremely confident and 6% reached or exceeded their goals. The third column shows that overall, only 59% of Gen Xers are confident in reaching their retirement goals, with 13% not at all confident, 24% not very confident, 34% somewhat confident, 22% extremely confident and 4% reached or exceeded their goals. The fourth column shows that overall, 67% of baby boomers are confident in reaching their retirement goals, with 10% not at all confident, 18% not very confident, 38% somewhat confident, 23% extremely confident and 7% reached or exceeded their goals. The chart shows that while the majority of participants are confident in reaching their retirement goals, millennials are the most confident. Source: Capital Group, Wisdom of Experience Investor Survey Series, January 2021.

Source: Capital Group, Wisdom of Experience Investor Survey Series, January 2021.

Millennial confidence: Reality tells a different story


While millennials report feeling confident about retirement, a closer look at the survey results shows that this confidence might be misplaced. According to our survey, 41% of millennials report needing $500,000 or less to retire comfortably, which is far below what experts generally regard as necessary for retirement.


And while the good news is that 8 in 10 millennials say they have money saved for retirement, the majority (67%) have saved less than $50,000.1  Even among higher income earners ($150,000+ annually), 25% have less than $50,000 in retirement savings.


Millennials are saving, but not enough


This bar chart shows total retirement savings for millennials across income brackets. The first group of bars shows that across all income brackets, 67% of millennials have saved less than $50K, 12% have saved $50K to $100K, 11% have saved $100 to $200K and 10% have saved $250K or more. The second group of bars shows that for millennials making $35K or less, 100% have saved less than $50K, 0% have saved $50K to $100K, 0% have saved $100 to $200K and 0% have saved $250K or more. The third group of bars shows that for millennials making $35K to $74K, 90% have saved less than $50K, 8% have saved $50K to $100K, 2% have saved $100 to $200K and 0% have saved $250K or more. The fourth group of bars shows that for millennials making $75K to $149K, 50% have saved less than $50K, 29% have saved $50K to $100K, 14% have saved $100 to $200K and 7% have saved $250K or more. The fifth group of bars shows that for millennials making $150K or more, 25% have saved less than $50K, 12% have saved $50K to $100K, 25% have saved $100 to $200K and 38% have saved $250K or more. The chart drives home the point that the majority of millennials have millennial retirement savings, although those with higher incomes have saved more. Source: Insured Retirement Institute, January 2020.

Source: Insured Retirement Institute, "Millennials and Retirement 2020," January 2020.

Competing priorities may be holding millennials back


Despite high levels of confidence, the truth is that millennials are under financial stress, which may prevent them from saving as much as they want. Millennials started their careers during the Great Recession, a period marked by high unemployment and sluggish wage growth.


From housing to childcare to education, millennials are paying more for just about everything relative to their parents’ and grandparents’ generations and this is having an impact on their retirement readiness. About 40% of millennial households are saddled with student debt, with outstanding loan balances on those amounts accounting for more than 40% of income. And they face higher housing costs. Data show that millennials dedicate more of their annual spending to housing than any other generation and they rate housings cost as their greatest financial responsibility.


Ranking of financial responsibilities (% of millennials selecting each as #1)

This bar chart shows which financial responsibility millennials rank as their number one priority, with 44% citing mortgage or rent payment, 22% citing retirement savings, 16% citing long-term savings goals, 8% citing emergency savings, 6% citing student loan repayment and 5% citing short-term savings goals. The chart illustrates that most millennials are putting housing costs above all other financial responsibilities. Source: Capital Group, Wisdom of Experience Investor Survey Series, January 2021.

Source: Capital Group, Wisdom of Experience Investor Survey Series, January 2021.

Engaging millennials: Why it matters to your retirement plan


As more and more baby boomers retire daily, millennials are expected to account for 75% of the workforce by 2025. More than previous generations, millennials highly value job satisfaction and want to feel that their employer cares about them. Millennials are more likely to change jobs due to mounting financial pressures or because they don’t feel engaged with their employers. Yet many plan sponsors may be unaware of these facts, which gives an advisor a great opportunity to explain why plan sponsors need to pay attention to these issues and use their retirement plan and other benefits to help reduce attrition, maintain employee satisfaction and improve hiring.


How plan sponsors can help

  • Promote the 401(k) plan to millennials: Advisors should remind plan sponsors that a 401(k) plan can not only be a powerful tool in addressing millennials’ financial pressures; it can also help attract and retain them by showing them that the employer cares. Employees who feel their employer values them are more likely to be engaged in their workplace and stay with the company longer, reducing the high cost of employee turnover.
  • Focus on financial education: Discuss with the plan sponsor how tailoring retirement plan education and advice to millennial needs and interests could help. Our surveys showed that millennials are interested in simplified plan menus and better fund descriptions to help them make better investment decisions. And despite embracing the do-to-it-yourself (DIY) culture for solving many of life’s problems, Capital Group’s survey found that more than any other generation, millennials desire additional education and tools to navigate their retirement plans – particularly when it comes to personalized advice on how to invest (42%).
  • Provide student loan assistance: Explore ways plan sponsors could help employees pay off student debt. Plan sponsors could do this by contributing a small amount monthly to eligible employees or experimenting with an employer match. There is currently a proposal under the SECURE Act 2.0 that would permit employers to pay down a student loan instead of contributing to a 401(k) plan and still receive an employer match in their retirement plan. Student repayment assistance can be costly for employers, so this conversation might not be appropriate for every plan sponsor. But for those who could make it work, this benefit could be a powerful recruitment and retention tool, as 41% of millennials rank student loan repayment assistance as one of the top employer benefits.3
  • Tailor employee communications: When advisors or plan sponsors are discussing retirement plans and other benefits, try to orient the conversation to match the needs of different generations. Baby boomers and millennials are in very different financial situations. Aligning the message’s content and tone to the various age groups in the room could make educational or enrollment session more effective, while showing that the employer understands each generation’s concerns.

For more information, read our full report on the findings from our Wisdom of Experience Survey.



Sue Walton is a senior retirement strategist with 24 years of experience (as of 12/31/2021). She holds an MBA from DePaul University with a concentration in finance and a bachelor’s degree in business administration, economics and international business from Marquette University.


Insured Retirement Institute. (January 2020.) "Millennials & Retirement 2020. Understanding, Saving, and Planning."

Chen, A., Munnell, A.H. (February 2021.) "Millennials' Readiness for Retirement - A 2019 Update." Center for Retirement Research at Boston College, 21(3), 7.

AICPA. (May 2019). "Health Insurance, Paid Time Off and Student Loan Forgiveness Top List of Millennials' Desired Workplace Benefits: AICPA Survey.”

Never miss an industry-leading insight

The Capital Ideas newsletter delivers weekly investment insights straight to your inbox.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

Use of this website is intended for U.S. residents only. Use of this website and materials is also subject to approval by your home office.

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.