As millennials enter their prime working years many are actively saving for their retirements, according to a new report by Wells Fargo Institutional Retirement and Trust.
The report, which looked at four million eligible participants in about 1,900 defined contribution pension plans, found 61 per cent of millennial workers (age 27 to 39) were participating in a DC plan. In comparison, 66 per cent of generation Xers (age 40 to 55) and 68 per cent of baby boomers (age 56 to 74) were participating.
While pre-retirees — defined in the report as those age 50 and up — are currently saving more than millennials, the younger generation is significantly outpacing their elders when it comes to retirement income replacement projections. The report estimated pre-retirees will replace 47 per cent of their income on average, while millennials will be positioned to replace 86 per cent of their income.
The report cited several reasons why millennials are in such a strong position, including that many younger workers gained access to DC plans than their older, pre-retiree counterparts.
When comparing 2013 rates to 2018, the report found all generations have increased participation in a DC plan. Among millennials, participation rose from 53 per cent to 61 per cent, gen Xers participation rate went up to 66 per cent from 59 and the boomers rate rose to 68 per cent, up from 63 per cent in 2013.
The report highlighted strategies plan sponsors can employ to encourage greater participation, including: automatic enrolment, target-date funds, generous match formulas and online tools and resources.