Millennial workers are focused on retirement in a big way.
The 15th annual Transamerica Retirement Survey finds that millennials in the United States are getting a tremendous head start on retirement savings: 70% are already saving for retirement either through employer-sponsored plans or outside the workplace, and they began saving at an unprecedented average age of 22.
“Many millennials began entering the workforce coincident with the Great Recession. It might be easy to conclude that their prospects for achieving a financially secure retirement are iffy at best,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies.
“Much to our surprise and delight, our research found employed millennials to be an emerging generation of retirement super savers.”
The motivation to save may be due, in part, to a forecast that the Social Security trust fund reserves are projected to be exhausted in 2033, which is before many millennials will even begin to retire.
Among those participating in employer-based or similar plans, millennials are contributing 8% of their annual salary into their plans. Even more impressive, the annual salary deferral rate for millennials whose employers offer a matching contribution is 10%, compared with only 5% of those not offered a match.
Despite the confidence-shattering events of the Great Recession, millennial workers’ household retirement savings dramatically increased to US$32,000 ($34,400) in 2014 from US$9,000 in 2007.
The increase may be attributable to the timing of millennials’ entry into the workforce, access to employer benefits, strong savings rates and dollar-cost averaging of contributions throughout the stock market’s decline and subsequent recovery.
“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,” Collinson explains. “Unlike older generations, millennials were less likely to have suffered steep declines in their accounts during the recession simply because they had not been working and saving long enough to have accumulated large balances.”