Are Millennials Caffeinating Their Retirement Savings?
It’s tempting to believe the report that Millennials spend more on coffee than they save for their eventual retirement. Especially if one has even one eye open at Starbucks. But a recent analysis challenges what seems to be conventional wisdom.
In “Fake News Fact Check: Do Millennials Spend More on Coffee Than They Save for Retirement?
” a column that recently appeared in Forbes
, American Enterprise Institute (AEI) Resident Scholar Andrew Biggs discusses his investigation into the validity of the seemingly unassailable premise.
Biggs notes that a survey conducted on SurveyMonkey
earlier this year found that Millennials do, in fact, pour more money into paper cups than into their retirement accounts. Not only that, Biggs notes, hundreds of media sources happily disseminated the information. But he was unwilling to accept the premise at face value.
Is the seductive headline backed by more empirical evidence than an online survey? Biggs found hard data in the federal Bureau of Labor Statistics’ Consumer Expenditure Survey
which, he says, reports that on the average, Millennials — defined in this case as those between ages 25 and 34 — in 2015 set aside almost $6,000 for “pensions and Social Security.” Roughly two-thirds of that, he calculates, comes from Social Security payroll tax deductions — leaving an average annual contribution to a non-Social Security retirement account of just under $2,000.
Biggs further notes that the survey found that the average Millennial household spent almost $3,100 — slightly more than the overall $3,000 per household average — on food they don’t make or have at home. And the $1,880 per year that the survey says the average Millennial sets aside annually in a retirement account amounts to 61% of the average out-of-home food expenditures.
That, plus an AEI study that found Millennials as a group are better at saving for retirement than their predecessor generations since they started at it younger, evokes some skepticism from Biggs that coffee is a higher economic priority than retirement saving for them. “So hold your heads high, Millennials,” writes Biggs. “You’re doing okay.”