WASHINGTON — When it comes to saving for retirement, millennials say they prefer cold, hard cash, according to a new survey — and that could be a problem for them down the line.
A new Bankrate.com survey found 30 percent of millennials cited cash as their preferred long-term investment option — the only age group that favored cash over the higher-risk, higher-reward stock market.
In contrast, 33 percent of members of Generation X said they preferred the stock market for long-term investments, along with 38 percent of baby boomers and 44 percent of members of the “silent generation.”
Bankrate said millennials’ propensity for cash likely stems from the fact they came of age when the stock market bottomed out in 2008, leading to the Great Recession. However, Bankrate said millennials’ “economic skittishness” could cause them to lose out on a lot of money over the long haul.
A 22-year-old worker who saves 10 percent of her $50,000 salary in a 401(k) and invests only in a money market fund that yields 2 percent would end up with $359,000 by the time she retires at 67, Bankrate said. Conversely, if the worker invests the same amount in a combination of stocks and bonds that yields 8 percent annually, she’d likely wind up with $1.9 million by the time she retires, according to Bankrate.
The good news is that despite what millennials say about their preference for cash, they are not necessarily staying away from the stock market entirely. Most workers in their 20s are being auto-enrolled into retirement accounts consisting of mutual funds containing a mix of stocks and bonds, Bankrate said, citing data from the Employment Benefit Research Institute.
The Bankrate survey, released annually, quizzed 1,000 respondents on their preferred investment option for long-term savings. The survey was conducted in July 2018 and has a margin of error of plus or minus 3 percent.
Overall, nearly a third of respondents — 32 percent — said the stock market is the best investment option. Less than a quarter — 24 percent — said cash is their top preference.
This year, just 22 percent of respondents cited real estate.
For the first time in four years, real estate was not the most favored investment option, Bankrate said.
