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Client Conversations: Millennials, You Can Have Your Avocado Toast and Eat It, Too

June 15, 2017

Perhaps surprisingly, millennials are a generation of savers. These five tips can help them take the next step to become smart investors.


If the stereotype is to be believed, millennials are financial fools. You choose pricey avocado toast over home ownership and artisanal coffee over retirement savings. But are you really so foolish? We can’t speak to Instagrammable breakfast preferences, but when it comes to retirement saving, you may be doing better than most think.

More than half of your age group, born between 1980 and 2000, are saving for retirement. The problem is, as many as 61% use savings accounts instead of investing in the stock market.Stinging memories of the early 2000s and the 2008 Great Recession have scarred you.

On top of that, you’re burdened by high costs of living, credit card debt, and an average of $30,580 in student debt.2 Considering these anxieties, transitioning from spender or saver to smart investor may be intimidating.

Here are five tips to help you make this financial lifestyle change:


1. Manage risk—market risk should be second to longevity risk.


Less than 10% of your generation consider themselves investors.3 Savings accounts are safe and easy. Investing in the stock market may seem risky, even scary. But you must stop fearing market risk and start fearing longevity risk if you don’t want to outlive your savings.

Assuming a 7% rate of return, a 25-year old who invests 8% of a $40,000 annual salary that increases by 2% every two years (a modest assumption) will have saved more than $1.4 million for retirement by age 70 (this hypothetical illustration does not reflect the performance of any particular investment). Savings accounts, quite simply, can’t do that. By nature, they have low interest rates and they grow slowly.


2. Time is your biggest asset—Use it.


Thanks to compound interest, you stand much to gain from retirement investing. Assuming a 7% rate of return, a 25-year old who invests $200 monthly until age 70 will have grown her investment to $762,944. If she waited until age 35, investing twice as much monthly, or age 45, quadrupling her monthly investment, she would not be able to achieve the same results as if she had started investing more modestly at age 25 (FIGURE 1).

Figure 1

25-Year Olds Can Save Much Less and Still End up With More


This hypothetical example assumes a 7% rate of return. This hypothetical illustration does not reflect the performance of any particular investment.


Most of your generation has 40 years to take advantage of compound interest. Even the oldest members have about 30 years. Time is on your side.


3. Be holistic—Invest enough and then some.


Starting early is not enough. To build a comfortable retirement nest egg, you should invest about 10% of your income—a goal only 9% of your age group are meeting. In fact, two thirds are investing less than 5% of their income.4 Try to sock away as close to 10% as you can because over time, inflation risk, market risk at the time of retirement, and the risk of being unable to cover emergency medical or life expenses increase. You need to take a holistic approach to retirement investing that leaves you prepared for multiple scenarios.


4. Prioritize—Saving for retirement is more important than paying off student loans.


Investing when you’re saddled by heavy student debt may be daunting, but even so, you should prioritize saving for retirement.

Let’s say you and a friend each have a loan of $31,000—about average for a college graduate in 2016. The interest rate on direct subsidized student loans for 2016 was 3.76%, so the minimum monthly payment over the course of a 20-year term is $184.You pay this minimum and invest $100 monthly for the duration.  

Your friend, on the other hand, puts an extra $100 toward his monthly loan payments, committing $284 monthly and paying it off in 10.5 years. For the next 9.5 years he invests that $284 monthly in the market.

At the end of the 20-year period, you both will have paid off your student debt and will have watched $284 leave your accounts each month. But, assuming a 7% rate of return, you will have $52,397 for your retirement, and your friend will have $41,741.


5. Value the human touch—with your parents and a financial advisor.


In a digital age of apps and robo-advisors, it’s easy to forget the benefits of human connection. Over one third of your generation avoids talking to their parents about personal finances.6 But parents can share their experiences and the do’s and don’ts they have picked up along the way. Your parents can also help you find the right financial advisor.

You may benefit greatly from working with a human financial advisor. He or she can help you not only to make the most of your retirement savings, but also to plan for travel, buying a home, starting a family, or achieving financial freedom.


Millennials aren’t fools—you know life is about more than avocados and Instagram. You recognize the importance of saving despite the hurdles in front of you, and most of you are doing it. The next step is to embrace risk and become investors. If you create a smart investment plan now, stick to it, and let compound interest do its thing, you just may be able to eat your avocado toast and enjoy a comfortable retirement.



1PlanSponsor, “Common Misunderstandings in Financial Literacy,” 4/5/17

2Dave Ramsey, “Millennials and Retirement,” 8/22/16

3Fidelity, “2016 Fidelity Investments Millennial Money Study: Facts, Figures and Findings,” 2016

4Fox Business, “Millennials Are Harnessing Their Best Retirement Weapon,” 12/15/16

5Federal Student Aid, Interest Rates and Fees

6Fidelity, “2016 Fidelity Investments Millennial Money Study: Facts, Figures and Findings,” 2016



All investments are subject to risk, including the possible loss of principal. 

This information should not be considered investment advice or a recommendation to buy/sell any security. In addition, it does not take into account the specific investment objectives, tax and financial condition of any specific person. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice. This material may not be copied, photocopied or duplicated in any form or distributed in whole or in part, for any purpose, without the express written consent of Hartford Funds.