Having a strong understanding of a retirement plan can help increase the ability for an individual to reach their financial future, though there are many who may not be taking advantage of this. Further personal finance studies may help people become stronger retirement savers in the future.
Nearly 75 percent of those surveyed explained that having a small amount of money invested in each part of their 401(k) plan is the strongest option, according to a report from MFS Investment Management. Another 46 percent felt that having money saved up in their retirement account should be used to cover other financial costs, such as paying down debt levels and putting money away for college.
“Companies and their retirement plan participants have access to the necessary ingredients to generate successful outcomes in defined contribution plans,” said Ravi Venkataraman, global head of Consultant Relations and Defined Contribution at MFS. “Solving the retirement equation is within reach – it comes down to making steady and consistent contributions, investing in an age appropriate and well diversified portfolio, refraining from taking premature withdrawals and maintaining a long term view.”
Many young people are trying to save money
Even though some people may have the wrong ideas about retirement savings, younger individuals are making an effort to get it right. According to a report from the Transamerica Center for Retirement Studies, the median savings level for retirement by millennials was $32,000, significantly higher than in 2007, when it was $9,000.
“Many Millennials began entering the workforce coincident with the Great Recession. It might be easy to conclude that their prospects for achieving a financially secure retirement are iffy at best,” said Catherine Collinson, president of TCRS. “Much to our surprise and delight, our research found employed Millennials to be an emerging generation of retirement super savers.”
A total of 70 percent of those polled explained that they are already saving for retirement due to work-sponsored plans like 401(k)s, the report explained. These individuals are saving for retirement at a younger age, as well. The median age that millennials were beginning their retirement savings was 22.
Salary deferral rates are also positive for these individuals, as the median figure for those who had employees match the retirement contribution was 10 percent, notably higher than the 5 percent from those who don’t have the option of a match.