Apple Federal Credit Union in Fairfax, Va. is taking steps to close the retirement-savings gap after a study by the CU revealed significant percentages of members across the age spectrum aren’t putting aside enough money for retirement.
The $2.6 billion-asset credit union surveyed about 1,000 members in northern Virginia, revealing 70 percent of millennials and 34 percent of baby boomers aren’t saving enough.
The survey also found that more than 90 percent of baby boomers said they are saving for retirement, and only 60 percent of millennials are doing so. Interestingly, both groups (who are separated in age by three decades) said they’re putting away about 5-10 percent of their annual income for retirement.
The two groups are also putting their savings in similar vehicles – 55 percent of Boomers are using their employer’s retirement plan, while 47 percent of Millennials said they enrolled in such a plan, though millennials say they are far less likely than boomers to use the services of retirement or financial advisors – mostly because they don’t want to pay them.
Millennials continue to be a major focus for many credit unions, particularly as those consumers enter the prime borrowing years of their lives. More than 38 percent of Apple FCU members – approximately 77,000 people – are millennials.
According to Pew Research, 35 percent of the American labor force participants are millennials, making them the largest generation of workers in the U.S.
As of 2017, 56 million Millennials (aged between 21 and 36) were working or looking for work, versus 53 million Generation Xers, who account for one-third of the labor force. Both were well ahead of the 41 million Baby Boomers, who represented 0ne-quarter of the total workforce.
However, while millennials are generally employed, multiple studies show they are not saving enough for retirement.
A study earlier this year from the National Institute on Retirement Security found that 66 percent of working millennials have nothing saved for retirement. For millennial Latinos, 83 percent have nothing saved for retirement.
Hence, a pressing need for both financial literacy and retirement savings education, as cited by Apple FCU’s survey.
Adjusting for a new generation of savers
As a result of the survey’s findings, said Apple FCU VP Jeff Callan, Apple Financial Services, a subsidiary of the credit union, plans to hire a financial advisor dedicated to millennial-specific needs as it begins to lay the groundwork for enhancing services aimed at that demographic.
“We’ve also made an investment in technology to offer online appointments, further appealing to this group,” he added.
Callan noted that while some 75 percent of millennials invest on their own (rather than pay an advisor), studies by Vanguard and Morningstar indicat that those who use a good investment advisor will earn 3 percent more on their portfolio per year.
“So we take the time to educate on the nuances of the market and help our members select investments according to their risk tolerance and time horizon,” Callan added.
Callan characterized the survey as “an example of one of our latest efforts” at improving financial literacy for its membership and helping them understand the importance of a savings plan for retirement.
Apple FCU, he noted, has a “rich legacy of financial literacy activity” which is ongoing, including educational seminars, student-run branches, Junior Achievement Finance Park initiatives and more.
In addition, the credit union has begun “heavily promoting savings” as both consumer demand and institutional needs “have shifted to a focus on deposits.”