It seems a recurring theme in the 401k industry is the problem of younger generations not investing as much as they should. Plenty of studies have published reasons why, and they all seem to come back to the same answer. 401kSpeciailstMag cites a recent Navient (a U.S. student loan servicer) study where they give us some not so surprising findings: debt is a key factor when it comes to the younger generation not investing enough.
To summarize these findings:
- Young adults with a college degree are more likely to save for retirement
- Young adults that have paid off their student loans save more for retirement
- Of young adults with student loans, those that prioritize paying off their loans report feeling more confident in their financial health than those that prioritize saving for retirement
- Those with an employer matched 401(k) are nearly 2x as likely to save for retirement, and those with access to 401(k) plans will save even more than those without.
So it seems that these results are pretty much in line with what you would expect. Young adults with higher education and more access to retirement plans are generally a lot more likely to be saving for retirement. Additionally, having student loan debt is a major factor to young adults when it comes to saving for retirement. Those with debt are a lot more likely to be prioritizing that debt and will naturally feel more comfortable when they pay it off.
“Here’s a shock—people tend to favor instant gratification over delay and discipline.”
Some may classify paying down student loan debt as “instant gratification,” but it’s definitely no small thing and the data shows that it’s one of the biggest factors for young people’s financial concerns, which is really no surprise.
Proper education to younger plan participants, especially those with student loan debt, is crucial to making sure they can adequately prepare for retirement. Being able to balance living expenses, debt, and saving for retirement can certainly be a struggle, so it’s important for a plan advisor to make sure their participants know how they should be saving.