The big reason why millennials haven’t invested in their 401(k)s: They don’t make enough money

Millennials most likely to say they can't afford to save earn less than $50,000 a year.

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Millennials most likely to say they can’t afford to save earn less than $50,000 a year.
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JGI/Jamie Grill/Getty

Many millennials aren’t saving for retirement because they can’t afford to – or, at least, they feel like they can’t.

Insider recently teamed up with Morning Consult to survey 2,096 Americans about their financial health, debt, and earnings for a new series, “The State of Our Money.” About 670 respondents were millennials, defined as ages 23 to 38 in 2019.

According to the survey, more than half of millennials (55%) don’t have a retirement savings account, such as a 401(k) or IRA. Another 13% do have a retirement account, but aren’t actively contributing to it.

Of the respondents with no retirement savings whatsoever, about 46% said unemployment was to blame (they were able to choose more than one answer). The youngest millennials are in their early-to-mid 20s and it’s likely they spent the last several years in college or graduate school. Overall, the labor force participation rate among 25-to-54 year olds is about 82%, according to the Federal Reserve of St. Louis.

Meanwhile, 10% of those lacking a retirement account said it’s because they’re not worried about retirement right now. Another 23% of the millennial respondents cited that as a minor reason.

Ultimately for most millennials – and even Gen Xers – it comes down to income. “I don’t earn enough money to save for retirement” was cited as a major reason by 53% of millennials with no retirement account and a minor reason by an additional 13%. About half of Gen X doesn’t have retirement savings, and 62% said income was a major reason why.

The millennial respondents most likely to say they can’t afford to save earn less than $50,000 a year – some 70% of the respondents cited insufficient income as either a major or minor reason. The median household headed by a 25- to 34-year old earned just over $62,000 in 2017, according to US Census data, so it’s unsurprising those earning less feel like saving money isn’t possible.

Still, a quarter of the millennials who say they don’t save in a retirement account because their income is too low earn between $50,000 and $100,000 a year, the survey revealed.

Research and data show it’s likely that a big portion of millennials’ paychecks go toward high rents, credit-card debt, and student loans, leaving many feeling like they have little left over to spend freely, let alone save for the future.

Check back on “The State of Our Money” throughout the month for more findings and analysis.