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Young and planning to retire

By Jennie L. Phipps ·
Wednesday, July 16, 2014
Posted: 4 pm ET

Millennials are saving like mad for retirement, according to a new study by the nonprofit Transamerica Center for Retirement Studies.

© Ammentorp Photography/

At least one incentive is Social Security. Eighty-one percent of millennials, defined as those born between 1979 and 1996, fear Social Security won't be around when they are ready to retire.

About 70 percent of millennials already have 401(k)s or some other retirement savings plan. And they began saving young -- at a median age of 22 -- the study found. By comparison, baby boomers started saving at the median age of 35.

As a result of their diligence, the median amount millennial households have already saved for retirement in 2014 is $32,000, and their median savings rate is 8 percent of annual household income of about $47,000.

If you plug those numbers into a 401(k) savings calculator, assuming a 30-year-old millennial earning and saving the median and earning a 7 percent annual rate of return on investment with 3 percent salary increases, this worker will have a tidy $1.1 million nest egg by the time she hangs up her work boots at age 65.

The calculation doesn't reflect an employer match. With an employer match, the return is even better. If an employer auto-increases the millennial's savings rate to 10 percent or more -- as many employers are doing -- the total rises by hundreds of thousands of dollars.

Auto enrollment a big factor

Catherine Collinson, president of the Transamerica Center for Retirement Studies, says auto enrollment in 401(k)s is an important factor in the healthy retirement savings of millennials. "Unlike earlier generations, where workers had to decide to join a 401(k) and fill out a lot of paperwork, enrollment today is usually automatic when a millennial is hired and there's almost no paperwork. That is making a real difference," she says.

Employers take note: Ninety percent of millennials consider a 401(k) or similar plan an important benefit, and 67 percent told researchers they would be likely to switch employers for a nearly identical job with a similar employer that offered better retirement benefits.

In many ways, the kids appear to be OK. The majority -- 74 percent -- of millennials are working full time. Two-thirds have some college education or they've graduated.

This study only considered the retirement savings successes of employed individuals. Collinson calls the millennial unemployment rate elusive because of the difficulty in defining how many millennials are actually still in school. But the Bureau of Labor Statistics says as of June 2014, the unemployment rate is 10.5 percent for people age 20 to 24 and 6.5 percent for those 25 to 34.

Collinson says successful retirement planning for millennials hinges on having a good job and a steady income, so one of the key issues for this age group will be keeping up with a fast-changing labor market. "Whether we like it or not, we live in a dynamic, rapidly changing and competitive world," she says, "and we have to accept that we will have to reinvent ourselves every so often."

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July 27, 2014 at 1:15 pm

Hi Don,

I feel some jealousy coming from you. The $1 million number was just an example. Put my information into the 401(k) calculator and you will see I will be way beyond that figure. 24 yrs. old, 53K salary, 3% increase, $11,500 401(k) balance, 8% contribution, and retirement age of 67. I do plan on increasing the 8% to about 15% in the next couple of years. This was suggested by my employers internal benefit calculator. The other thing individuals need to consider when they do reach retirement, is how to draw down the funds. Putting a bulk of this money in an annuity with a cost-of-living adjustment will prevent the money from losing it value afterwards. The money while its in the 401(k) is making up for loss in value while invested.

July 27, 2014 at 9:34 am

As a landlord in a big city in Pa, I am upset by the amount of young people who are on Social Security disability. To me it is ana

Jo Ann
July 18, 2014 at 8:08 pm

I just read an article a month ago stating just the opposite of this one. Personally, I think this is a motivational commentary attempting to inspire the young. I am curious where the statistics were obtained, one can only hope it works however.

July 18, 2014 at 6:53 pm

I agree with the advice above, but I did not read any advice on how the millennial's and everyone else should be living within their means. If you want to retire at a reasonable age with enough money to hold you, you really need to look at your spending. House, vehicle(s), etc should be wisely chosen and all big ticket items should be well thought out before purchasing.
Living debt free in your later years of work will mean everything when considering retirement. Just my humble advice.

July 18, 2014 at 1:23 pm

So they will have a million? Why not mention how much less a million will be worth then -- even in today's dollars. They'll need much more than that. But I do congratulate the millennials for saving so much at such an early age.

July 17, 2014 at 11:34 pm

How do people that are retired save for emergencies?
How can we get a higher interest rate on our savings?
We can barely afford our meds.

Thank You

July 17, 2014 at 7:21 am

The key is to start saving/investing early in life and be consistent (save with every paycheck). The power of compounding is lost on many people. Also take advantage of any employer matching plan, max out contributions when possible, eliminate debt, avoid risks with your nest egg and plan for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.). I use several sites for retirement information including the site Retirement And Good Living which provides information on finances, health, retirement locations, part time work and also has a great blog of guest posts about a variety of retirement topics.