Millennials and Retirement

Saving Early but Not Saving Enough

A spotlight on the spending and saving habits of today's pre-retirees

March 11, 2015 – DES MOINES, Iowa–(BUSINESS WIRE)–While the majority of millennials are starting early when saving for retirement, most aren’t saving enough now in order to enjoy a comfortable retirement later, according to new research from the Principal Financial Group®.

“The employer match is a valuable and important incentive to get millennials saving, but the amount of the match is not a signal to stop saving” In a recent survey of millennial workers, 63 percent report they started saving for retirement before age 25. But less than a third are saving at least 10 percent of their salary through their employer-sponsored retirement plan.

“It’s great to see young savers getting started early,” said Jerry Patterson, senior vice president of retirement and investor services at The Principal®. “But just as important as saving early is saving enough. Our analysis over the years has found that saving 10 percent of your salary, plus any employer match, over the course of a working career is the key to achieving a more secure retirement1.”

Candid Conversations Captured on Video

In addition to this new study, The Principal recently met with millennials across the country in order to gain insights into how they felt about planning and preparing for retirement, and what specific steps they were taking to get there.

These conversations were captured in a series of videos, the first of which is available to watch. “It’s clear millennials are aware of the importance of planning and preparing for retirement. It’s also clear they are struggling to balance that with all the other demands needing their time and money,” Patterson said. “Most millennials we spoke with haven’t done the math to determine what level of savings they should be targeting, but all agreed that they weren’t doing enough.

This provides a tremendous opportunity for financial advisors to connect with this generation of young investors. They need the direction, and in their hearts, they know it.”

Millennials Take the Match

According to the survey, 83 percent of millennials take full advantage of matching contributions when offered through their employer-sponsored retirement plan. “The employer match is a valuable and important incentive to get millennials saving, but the amount of the match is not a signal to stop saving,” said Patterson.

“Most matching formulas phase out once an employee reaches a savings level of three or four percent of pay—well short of the 10 percent experts indicate they should be saving. One easy remedy is for plan sponsors to encourage employees to save at a higher rate by ‘stretching the match.’”

Retirement vs. Everything Else

Saving for retirement competes with many big-budget items for millennials. When asked to list their three largest budget items, it may come as no surprise that the top answers were mortgage/rent (65 percent), food (38 percent) and car/transportation (30 percent). Other major expenditures included basic expenses (27 percent), student loans (20 percent) and credit card debt (16 percent).

“Many millennials may see these large expenses—especially student loans and other debt—as primary obstacles to saving anything for retirement,” Patterson said. “But in most situations, it’s possible and necessary to both save for retirement and pay down debt by creating a plan and sticking to it.”

Financial Independence, Sort Of

The employer match is a valuable and important incentive to get millennials saving, but the amount of the match is not a signal to stop saving

When asked at what age a young adult should be financially independent, 84 percent of millennials responded by age 25 or younger. And six of 10 millennials expect to be better off financially than their parents.

But some millennials report their parents are still footing the bill for various expenses, including their cell phone bills (12 percent), car insurance (8 percent), health insurance (7 percent) and rent/mortgage (7 percent).

Additional Research Findings

  • 66 percent of millennials have established a monthly budget and 35 percent use a digital-budgeting system
  • 57 percent of millennials have an emergency savings fund, but less than one third (32 percent) believe their fund could cover basic monthly expenses for more than six months
  • If purchasing a financial product, 47 percent would prefer to do so with a financial professional either in-person or over the phone; 38 percent would prefer to make the product purchase online.

For more research, analysis and insights from The Principal, visit The Principal Knowledge Center and connect with us on Twitter.


The Principal Financial Group Millennial Research Study was conducted online within the United States by the Principal Financial Group between October 2014 and December 2014. Respondents to the survey were 867 American workers ages 23-35.

About the Principal Financial Group
The Principal Financial Group® (The Principal®)2 is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies.
Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $519.3 billion in assets under management3 and serves some 19.7 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit 1 Based on analysis conducted by the Principal Financial Group®, August 2013. The estimate assumes a 40-year span of accumulating savings and the following facts: retirement at age 65; a combined individual and plan sponsor contribution of 12 percent; social security providing 40 percent replacement of income; 7 percent annual rate of return; 2.5 percent annual inflation; and 3.5 percent annual wage growth over 40 years in the workforce. This estimate is based on a goal of replacing about 85 percent of salary.
The assumed rate of return for the analysis is hypothetical and does not guarantee any future returns nor represent the return of any particular investment. Contributions do not take into account the impact of taxes on pre-tax distributions. Individual results will vary. Participants should regularly review their savings progress and post-retirement needs. 2 “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group. 3 As of Dec. 31, 2014.