Updated: Jun 1, 2020
By Matt Salm, Investment Analyst
Amid the ongoing economic and market turmoil, a clear pattern has emerged: Americans are saving less for retirement. Recent surveys conducted by Bankrate and MagnifyMoney capture this phenomenon well, but the details of the survey results differ significantly.
According to Bankrate survey data, which came out this week, 20% of Millennials have tapped into their retirement savings. By comparison, only 8% of Gen Xers and 10% of Baby Boomers have done the same. Given that Millennials are, on average, in more precarious financial situations than older generations, this finding isn’t all that surprising.
The survey from MagnifyMoney found quite a different trend across generations. Their results showed that 53% of Baby Boomers have completely paused retirement contributions during the pandemic, while an additional 12% have reduced their retirement contributions. In contrast, only 13% of Gen Xers and 17% of Millennials have completely paused retirement contributions, and about one fourth of those in the younger generations have reduced their contributions.
Why would Bankrate’s survey show that Millennials are the most likely to tap their retirement savings while MagnifyMoney’s survey shows that Millennials have been more diligent than Boomers about keeping up their retirement contributions? To start, the surveys asked slightly different questions. Tapping retirement savings isn’t the same thing as pausing contributions, though the two behaviors might happen under similar circumstances. Furthermore, MagnifyMoney only surveyed people who have retirement savings accounts – which includes less than half of Millennials. This selection bias could distort the findings. But perhaps most importantly, Boomers may have paused contributions because they’ve already accumulated the wealth they need for retirement, whereas Millennials are eager to keep up their contributions in order to capitalize on the power of compounding returns.
What’s the takeaway? Clearly many Americans are financially stressed, and this true across generations. But if you can afford to keep saving retirement, you should do so, especially if you have a long investment horizon.