Millennials are apparently in a lot better shape when it comes to tucking money away for retirement than many of us might have thought. In fact, if we’re to believe the latest data from the Transamerica Center for Retirement Studies, a strong case could be made that this workforce demographic definitely has its act together.
According to TCRS’ 15th Annual Transamerica Retirement Survey, 70 percent of millennials are already saving for retirement either through employer-sponsored plans, such as 401(k)s, or through plans outside the workplace. What’s more, the median age at which these workers begin to save for retirement is 22. Pretty impressive, no?
The study also revealed that millennials who are participating in employer-sponsored 401(k)s and the like are contributing a median of 8 percent of their annual salary into those plans. (At companies offering a match, the salary deferral rate hits 10 percent!)
In actual dollars, the annual retirement savings for millennial households jumped from $9,000 in 2007 to $32,000 in 2014, an increase that obviously is connected to the timing of their entry into the workforce (many on the heels of the Great Recession).
Others have studied this issue before, but I don’t recall seeing anything nearly as upbeat as these TCRS figures. In June, Wells Fargo released the results of its 2014 Wells Fargo Millennials Study. That survey found 55 percent of millennials reporting they were saving for retirement, compared to 45 percent who were not. (Unlike the TCRS study, that study included those currently not in the workforce, perhaps explaining the discrepancy.)
No doubt, more than a few factors are behind TCRS’ extremely encouraging numbers, including the fact that many millennials are fully aware Social Security won’t be there for them (at least in a meaningful way) when they retire. (Indeed, more than eight in 10 respondents said they believe that will be the case). But I have to imagine at the top of the list of the various drivers here is the widespread adoption of automatic enrollment, a relatively newer development.
I spoke to TCRS President Catherine Collinson the other day to get her take on the findings. As you might imagine, she said she was “enormously pleased” with the high savings rate among millennials. “It’s encouraging to see they’re getting such a head start, compared to older generations,” she pointed out.
Looking at the results, Collinson said, there’s little question millennials take retirement benefits very seriously and consider these offerings much more than just a nice-to-have. Indeed, one statistic in TCRS’ study found that three out of four millennials said they consider it a major reason for accepting a job offer. So if employers don’t have competitive offerings today, they would be well served to close that gap soon.
The other thing in the report worth noting is the importance these workers place on information and advice, an area that continues to be something of a weak spot for many organizations. Nearly three-quarters (73 percent) of the respondents in the TCRS study said they would like to receive more education and advice on how to achieve their retirement goals, compared to 65 percent for Gen X workers and 57 percent for baby boomers.
On this front, Collinson pointed out, employers need to take greater advantage of the innovations that are out there in the provider community. “Providers are always innovating,” she said, “but there appears to be a disconnect between those innovations and what plan sponsors are actually doing.”
Certainly, that’s a point plan sponsors might want to consider as they formulate their strategies for 2015.