Retirement: Older millennials have ‘caught up’ to Baby Boomers, expert says

Anqi Chen, Boston College Center for Retirement Research Assistant Director of Savings Research, joins Yahoo Finance Live to discuss how different generations are saving for and thinking about retirement.

Video Transcript

DAVE BRIGGS: Welcome back. Millennials are reshaping what it means to retire. A new study by Charles Schwab reveals that millennials have surpassed baby boomers when it comes to saving for retirement. Let's bring in our next guest, Anqi Chen, assistant director of saving research at Boston College Center for Retirement. This is all part of our retirement segment brought to you by Fidelity Investments. Angie, nice to see you. So let's talk about this. What did this study find?

ANQI CHEN: Well, it seemed like the study showed that millennials have more in retirement-- have a lot more in retirement savings than baby boomers. I think part of the reason is that older millennials, specifically, have really caught up in a lot of major life milestones and labor market outcomes that we've had feared that they were behind on earlier in their careers. Also, baby boomers are currently in retirement. So they'd be drawing down their assets right now.

DAVE BRIGGS: How are the two groups defining or value retirement differently according to this research?

ANQI CHEN: So it seems like the research shows that the baby boomers value stability, whereas millennials are a little bit more mixed-- some value stability and others value, perhaps, traveling. I do wonder what part of it is because baby boomers are obviously older and what share of millennials, as they get to the baby boomers' age, will also value stability.

DAVE BRIGGS: One surprising takeaway in this research was that millennials, only 48%, expect to own a home in retirement. Is that a dramatic shift in priorities? And how else do we see priorities evolving?

ANQI CHEN: Yeah, that is surprising. We do typically see homeownership decline slightly as households enter retirement. But currently, I think the homeownership rate is about 60%. It could be that millennials are just facing a really tough housing market and they can't quite imagine how they would be owning a house in the future. But again, I'm not sure whether it is really going to happen in the future versus once millennials get to the same age as baby boomers are now, that they would also see a rise in homeownership.

DAVE BRIGGS: And, Angi, early indications about Gen Zers and how their priorities and saving methodology differs.

ANQI CHEN: Well, Gen Zers, most of them are not in the labor market yet. I'd be very curious to see as more of them enter the labor market what their savings behavior is going to be like.

DAVE BRIGGS: Some research that you guys conducted there at Boston College, very interesting, with this primary question-- do households save more when their kids leave away? So when they leave for college, when you become an empty nester, do you begin to save more? What were your takeaways from that research?

ANQI CHEN: Yeah, so that's a new line of research we just looked at. And it seems like we couldn't really find much evidence that parents save more when their kids left. That didn't show up in their 401(k) and retirement accounts, it didn't show up in less debt. But at the same time, other researchers have found that parents' consumption went down after their kids left, so we are left with this little confusing puzzle.

One thing we did find recently was that parents reduced their income and their earnings after their kids left. So that might be a driving factor in terms of why parents are not saving more, but also consuming less after their kids move out.

DAVE BRIGGS: So just to follow up there-- the kids leave and the parents begin to work less. Is that what the data's showing you?

ANQI CHEN: That's correct. Work less.

DAVE BRIGGS: And once those kids leave, do the parents shift their methodologies of how they are saving and planning for retirement? Do they change their noticeable patterns?

ANQI CHEN: Yeah. It doesn't seem like they are. We saw very, very small increases in savings in retirement and almost no noticeable difference in terms of paying down debt.

DAVE BRIGGS: So any advice for those parents once kids leave the house?

ANQI CHEN: I mean, it can be understandable that once kids leave, that you want to spend more or work less, because, obviously, kids are expensive, but to also keep in mind that retirement is expensive and retirement is getting longer. So allocating some of those resources into a retirement fund can be beneficial in the long run.

DAVE BRIGGS: All right, great stuff, Anqi Chen. Thank you for being here on a Friday. Have a good weekend.