Millennials (With Jobs) Are Super Saving Their Way to Retirement

You may have heard that Millennials are taking saving more seriously than Gen X-ers and Baby Boomers did at their age. But their financial prospects look much worse, given student loan debts, high unemployment, and shaky entitlement programs.

No question, Millennials face steep challenges. But it turns out, twenty-something savers who managed to land jobs (some 74% of this age group) are doing even better than you might have thought—and they've built a huge head start toward retirement security.

Those are the findings of a just-released study by Transamerica Center for Retirement Studies, which surveyed more than 1,000 Millennials in the work force. "Millennials have seen what happened to their parents, many of whom lost their jobs and savings in the financial crisis—and they are taking steps to avoid a similar outcome," says Catherine Collinson, president of the Transamerica center. "We're seeing an emerging generation of retirement super savers."

Millennials have also benefitted from the widespread adoption of 401(k) auto enrollment, automatic contribution hikes, and target date funds, Collinson says. Some 71% of Millennials who are offered a 401(k) end up joining their plan. By being enrolled into 401(k)s as soon as they start their jobs (unless they opt out), many Millennials are being nudged onto the retirement savings path sooner than previous generations.

How much sooner? Some 70% of Millennials started saving for retirement at an unprecedented young age, just 22, the survey found. By contrast, the average Boomer began saving at age 35, while Gen Xers got started at 27.

Transamerica's findings show that Millennials are contributing an average 8% of salary to their 401(k) plans; adding an employee match, they're stashing a solid 10% of income into their accounts. Those findings echo earlier surveys of young adults, which have found that Millennials are saving more.

Those contribution rates are especially impressive, given that Gen X savers are putting in just 7% of pay before the match on average. Boomers are saving at a higher rate, 10% before the match, but they also have higher pay on average and are facing a looming retirement date. Some 27% of Millennials also said they raised the amount they contributed in the past 12 months vs. just 7% who decreased it.

Thanks to this early savings start, Millennials have amassed an average $32,000 in their 401(k) accounts, according to Transamerica. And unlike older generations they are relying heavily on professional advice to invest their money—some 62% use a managed account or target date fund, vs just 47% of Boomers and 56% of Gen X-ers.

Of course, most young adults have plenty of shorter-term financial worries. Some 27% say their top priority is covering basic living experiences, and 27% say they want to pay off debt. Only 16% listed saving for retirement as a top concern. Complicating matters, three in 10 expect to provide support for their aging parents or other family members.

Even so, Millennials are optimistic about their retirement prospects. A whopping 60% expect to retire at age 65 or sooner. That's a stark contrast to the majority of Baby Boomers (65%) and Gen X (54%), who plan to work past retirement or never retire. But Millennials share the expectations of older generations in other ways—half plan to work the job in retirement, either full time or part time. When it comes to staying busy in retirement, there's not much of a generation gap.