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