Financial Planning, Retirement, Economy

Gen-Y Consumers And Retirement

10/25/16 8:00 AM

millennial-working-in-coffeeshop.jpgThe Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations provides a detailed snapshot of Americans’ labor market, household finances, and inflation outlooks. A few highlights from the latest release include that a larger fraction of respondents in September reported that current credit conditions are easier, and consumers’ expectations for credit availability one year from now also improved. Moreover, the proportion of surveyed consumers who said that they believe credit availability will be “somewhat harder” or “much harder” twelve months from now ended last month at the lowest level since June 2015.

As for the negatives, household spending growth expectations have largely stalled in 2016, as have the number of survey respondents reporting that they believe they will be financially better off one-year from now. Even more alarming is that the average probability reported by consumers for not being able to make a minimum debt payment over the next three months climbed to 14.5 percent in September, the highest reading since February 2013. Lower-income respondents were by far the most likely group to be worried about missing a debt payment but even higher income consumers have started to report elevated concerns. All of this agrees with a new Bankrate survey, which found that nearly two-thirds of Americans are limiting their monthly spending due to concerns about stagnant income, the economy, and excessive debt.

Younger consumer respondents were another big factor behind September’s rise in debt delinquency expectations, as well as the overall decline in median expected household income growth. Similarly, a report from GOBankingRates we briefly mentioned last week also found that Millennials generally have a harder time setting money aside than older generations. In fact, just 27 percent of adults ages 18 to 24 said that they have at least $1,000 in savings, and only a third of older Gen-Y adults (ages 25-34) reported the same. That is not exactly surprising since Millennials are at the beginning of their working careers and therefore likely still nowhere near their full earnings potential. Overspending, though, could also being playing a role because a recent survey by TD Ameritrade found that more than nine in ten Millennials admitted that they overspend at least one month per year.

Fortunately, young adults appear to recognize their financial mistakes and have a desire to do better. At least that is what a new report from Bank of America Merrill Lynch suggests, which found that contributing to a 401(k) and saving in general are growing priorities for Gen-Y. Seven percent of surveyed Millennials even said that retirement and Social Security are economic issues that are already important to them that they want to see discussed by Presidential candidates more frequently. Gen-Y respondents also said that they wish they had learned more in school about saving for retirement, investing, and other basic money management concepts. For employers, a potential takeaway from such responses is that a financial wellness program could be an effective benefit offering for attracting young talent.



Sources: FRBNY, Bloomberg, Wells Fargo, Bankrate, GOBankingRates, TD Ameritrade, BofAML

Post author: Charles Couch