Target-Date Funds, Job Stability Help Millennials Save More for Retirement

NEW YORK (TheStreet) — Janelle Coleman is paying off $100,000 in student-loan debt that she incurred while a student at New York University, but she still finds a way to save money in a 401(k) plan, too.

“It’s hard, but I manage,” said the 2009 English American literature graduate. The 29-year-old social-media manager and Delaware native is among millennials who are balancing contributing to a 401(k) plan while paying down debt, ranking them both as priorities.

“Millennials are at a point in their life where they're still in debt accumulation stage,” said John Ulzheimer, credit expert with “Children, houses, paying off student loans and cars are a priority for them.”

While 23% of millennials not saving enough cite student loans as a major contributing factor, what’s helping them save what they can afford are target-date funds, which automatically adjust asset allocation in a portfolio across stocks and bonds over time.

“The adoption of automatic enrollment has driven the growth of target-date funds,” said Anne Coveney, senior manager of Thought Leadership, the research arm of T. Rowe Price (TROW).

A T. Rowe Price study found that 47% of millennials are invested in target-date funds but that debt remains an obstacle to saving for retirement.

“Paying off credit-card debt before investing in a 401(k) account is as close to a financial no-brainer as exists because the amount of interest you pay on credit-card debt is considerably higher than whatever you're going to earn in a 401(k) investment, and that's every year,” Ulzheimer said.

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