Prior to a recent study by Transamerica Center for Retirement Studies (TCRS), industry professionals and family members expressed concern that Millennials were not saving enough for retirement.
“Many Millennials began entering the workforce coincident with the Great Recession,” said Catherine Collinson, president of TCRS in a press release. “It might be easy to conclude that their prospects for achieving a financially secure retirement are iffy at best.”
Through the findings in the Transamerica Retirement Survey, researchers found employed Millennials to be an emerging generation of superb retirement savers.
“Millennials workers are focused on retirement in a big way. Our research found that three out of four are already discussing saving, investing and planning for retirement with family and friends,” Collinson said. “In fact, Millennials are twice as likely to frequently discuss retirement compared to their parents’ generation.”
The study found that 18 percent of Millennial workers frequently discuss retirement compared to just nine percent of their Baby Boomer counterparts.
A key finding from the study shows that Millennials are beginning to save for retirement at the median age of 22, which is five years sooner than Gen Xers and a staggering 13 years sooner than Baby Boomers. Despite entering the workforce in the midst of the Great Recession, Millennials are “much more likely” to be recovered from its economic impact than older generations and 68 percent more confident they will retire comfortably.
“Millennial workers who first started saving for retirement at the bottom of the equity market in 2009 have likely enjoyed substantial gains in their account values as the market recovered,” said Collinson. “Unlike other generations, Millennials were less likely to have suffered steep declines in their accounts during the recession simply because they have not been working and saving long enough to have accumulated large balances.”
In addition, about 80 percent of Millennial workers expressed concern about whether or not Social Security will be there for them when they retire. As a result, they have begun investing more of their money into employer-sponsored 401(k)s or similar programs.
Among those participating in an employer-based 401(k)s or similar plans, Millennials are contributing eight percent (median) of their annual salary into their plans.
While approximately 46 percent of Millennials have some sort of retirement plan, only 13 percent have a written plan that includes information such as retirement income needs, costs, expenses and risk factors.
Collinson stressed that the key to attaining retirement readiness is to have a well-defined, written strategy in which a retirement calculator or worksheet is used.
“Over the course of Millennials’ working lives, the retirement landscape will inevitably change,” Collinson said. “It’s important to begin planning for retirement now and periodically update those plans over the coming decades.”
Collinson offers three strategic steps that every Millennial should take to achieve retirement readiness and long-term retirement success:
1) Start saving for retirement as early as possible.
2) Calculate retirement savings needs, develop a retirement strategy and write it down.
3) Continually educate yourself about retirement investing.