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Need to Save More Spans Generations

The “Sandwich Generation” (roughly those age 45-65) and the Millennials (roughly those age 18-35) are separated in age by one to four decades. That’s quite a gap, and those generations have starkly different needs and concerns. But while the reasons for it may differ, they are alike in at least one respect — the need to save more for their retirement.

Recent studies by BMO Harris Premier Services and BNY Mellon concern the factors behind these generations’ need to save more and that explain why it is hard for them to do so. One of the common denominators is that many of their members may not be financially ready for retirement when it comes, absent changes in the information they receive and the actions that they take.

The Sandwich Generation is in the unique position of caring for children and older relatives at the same time; many of its members are paying tuition and associated fees while dealing with the aging of their parents. BMO Harris’ study says that the members of this generation have reached one-third of their retirement savings goals; in addition, 30% have not thought about what their retirement will look like and 43% don’t know when they will retire.

The Millennials, at least some of whom were raised by members of the Sandwich Generation, seek information and options unavailable and possibly unwanted by their predecessors, according to BNY Mellon. Its study says that the generation was protected more than previous ones, and consequently has “overoptimistic expectations.” Key findings include the following:

  • 46% do not obtain any information on financial matters through their workplace or educational establishment;

  • 77% want to be told the hard, cold truth concerning their post-retirement finances and health;

  • they would allocate 42% of their portfolio, on average, to products they consider to be investing in a socially responsible manner; and

  • 63% would save more if their retirement account allowed them to make multiple withdrawals throughout their lifetime.

More Common Threads

Increasing longevity, and its consequences for retirement readiness, is something else these disparate generations have in common. BMO Harris notes that this, plus the greater number of people who have children later in life than had commonly been the case, contributes to the stress the Sandwich Generation feels in preparing for a retirement that may not be far off and may be longer than it was for previous generations. Millennials, similarly, contend with a need to save for retirement exacerbated by the longer lifespans and longer retirements.

They also share at least a recognition that they need to do more to be ready. BMO Harris says that the Sandwich Generation does consider retirement to be a top priority, and as for the Millennials, BNY Mellon says that the problem is not a failure to recognize the need to save.

And both generations need more information. BMO Harris Financial Advisors President Mike Miroballi told Marketwired that the members of the Sandwich Generation are stretched financially and emotionally and that their time “comes at a premium,” and that they can benefit from services that provide a “coordinated, comprehensive view of their financial picture.”

As for the Millennials, BNY Mellon concludes that the need for information derives simply from not being told about ways to save and not being told in ways they understand. “They want to be told the truth about just how poor in retirement they will be if they do not start saving for retirement early,” says the study, adding that “they want to be treated like adults with more confrontational, honest and realistic messages about the challenges they face in providing for their retirement.”