Millennials learned a hard lesson from the Great Recession — not to anticipate an easy path to retirement. As a result, they’re saving at a furious rate, though they’re still not doing a very good job at planning.
So says the latest research from the Transamerica Center for Retirement Studies, which found that millennials (those born between 1979 and 1996) are already “frequently” talking about retirement (18%) more than boomers (9%).
Transamerica also found that 41% of millennials are preparing to support others after they themselves have retired. For 29%, it’s their parents they're thinking about; 20% figure they’ll have to be the lifeline for other family members. A whopping 81% don’t think Social Security will be there when they need it.
Millennials were saving before the recession, but their estimated median savings amounted to just $9,000 in 2007. In 2014, that median has zoomed up to $32,000.
“Many millennials began entering the workforce coincident with the Great Recession. (As a result), it might be easy to conclude that their prospects for achieving a financially secure retirement are iffy at best,” said Catherine Collinson, president of TCRS. “Much to our surprise and delight, our research found employed millennials to be an emerging generation of retirement super-savers.”
Among those participating in an employer-based 401(k) or similar plan, millennials are contributing 8% of their annual salary into their plans, Transamerica said. 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.
Millennials also have gotten a nice boost from the rising stock market.
Said Collinson: “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. 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.”
While they’re big on saving, however, millennials are not so great in terms of planning, Transamerica said.
While it’s true they’re participating at a rate of 70% in employer-sponsored retirement plans, and have mapped out a plan for retirement, many of those maps are in their heads. Of the 59% who say they have a retirement strategy, only 13% have bothered to put it down on paper.
Perhaps the most alarming bit of information is that among millennials who have had a go at figuring out how much they’ll need to retire, 52% had “guessed” while only 10% actually used some sort of retirement calculator or worksheet.
“One of the most important secrets to attaining retirement readiness is having a well-defined written strategy about retirement income needs, costs, expenses and risk factors,” Collinson said.
Millennials will need to do more than just save to pull that off.
Check out The Fastest Growing Retirement Plan You Never Heard Of on ThinkAdvisor.