Gen X and Gen Y ‘super savers’ deferred 90 percent or more of the IRS maximum ($16,500-$18,000) to their retirement accounts in 2017. That’s according to new research from Principal Financial Group, which found that while retirement may be a distant goal for many in the group, more than half saved over $20,000 for retirement in the last year.
So, what drives their motivation for saving? Sixty-five percent cited the simple “having a good life during retirement,” and another 47 percent said a desire to pursue passions in retirement comfortably.
“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 should help set them up to have the freedom to do the things they want in the future.”
Interestingly, the overwhelming majority (70 percent) are making maximum contributions without having a formal budget in place, instead favoring other sacrifices to max out their retirement contributions. The top sacrifices ‘super savers’ cite include:
- Travel: Millennials aren’t seeing the world nearly as much as they’d like, with 41 percent limiting their travel expenses.
- Homes: ‘Super savers’ live in humble dwellings, with 31 percent of Gen Y owning a modest home at the expense of savings.
- Stress: For both generations, high work-related stress (44 percent) comes alongside the desire to max out retirement savings.
‘Super savers’ have a few items worth a splurge. More than half (51 percent) cite travel as their top splurge expense, with subscription entertainment services such as Netflix or Hulu (44 percent) and general shopping splurges (27 percent) making the cut, as well.
Family is important to ‘super savers.’ Nearly three-quarters of ‘super savers’ (72 percent) learned nothing or very little about personal finance in school. Instead, they overwhelmingly cite their parents (41 percent) as the top influence for their savings habits. Additionally, a third of respondents cited their parents’ financial situation as a driver in their own savings habits.
“The more we learn about what makes these ‘super savers’ tick, the more may want to emulate their savings habits,” added Patterson. “These savings habits are especially impressive considering most don’t have a formal budget. This underscores the importance of retirement plan features like auto-enrollment and auto-escalation. With these features, these ‘super savers’ exemplify the ‘don’t even notice it’s gone’ approach.”
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