Younger generations get a bad rap for their saving habits, but there is a group of savers who are a financial force to be reckoned with, according to a new survey.
Principal Financial Group’s survey, which digs into the financial habits of Gen X and Millennial savers who are deferring 90% or more of the IRS maximum amount to their 401(k) account, finds that nearly 60% of Gen X and 55% of Millennial respondents saved over $20,000 for retirement in 2017.
What drives their motivation for saving? According to the findings, here are the top five reasons for their savings habits:
- A desire for a good lifestyle in retirement (65%)
- They have the income to do so (59%)
- Having disposable income in retirement to pursue passions (47%)
- Retiring at an early age (44%)
- Traveling in retirement (43%)
“There is no better advice I can give anyone than save more, earlier,” said Jerry Patterson, senior vice president of retirement at Principal. “These ‘super savers’ are making sacrifices today that will help set them up to have the freedom to do the things they want in the future.”
How to be a ‘Super Saver’
Somewhat surprisingly, the overwhelming majority (70%) are making maximum contributions without having a formal budget in place. Instead, this group favors large-scale sacrifices to max out their retirement contributions. The top sacrifices cited include:
- High levels of work-related stress (44%)
- Not traveling as much as they prefer (40%)
- Driving older vehicles (39%)
- Owning a modest home (33%)
Nevertheless, super savers do cite a few items worth splurging. Slightly more than half (51%) cite travel as their top splurge expense, with subscription entertainment services such as Netflix or Hulu (44%) and general shopping splurges (27%) making the list.
Overall, 44% of these savers say that they work with a financial advisor, while 31% say they don’t plan to work with one in the future and 25% say they don’t currently work with one, but plan to in the future.
Meanwhile, nearly three-quarters of super saver respondents (72%) say they learned very little about personal finance in school, but instead cite their parents (41%) as their top influence for savings habits. In addition, a third of respondents cite their parent’s financial situation as a key determinant in their own savings habits.
“These savings habits are especially impressive considering a lack of formal budget they employ,” Patterson further observes. “This underscores the importance of plan auto enrollment and auto escalation. With these options, these ‘super savers’ exemplify the ‘don’t even notice it’s gone’ approach.”
Conducted between Oct. 19 and Nov. 10, 2017, the survey was sent to Millennial and Gen X participants who work for a company that uses Principal as their retirement plan recordkeeper and have either reached the max for retirement contributions or saved 90% of the max allowed. The survey was sent to 29,084 participants via email, with 1,498 participants responding for a response rate of 5.2%.
