'Not Much Financial Education' — Yet Millennials Have Boomers and Gen X Beat When It Comes to Retirement Savings. Here's Why. Millennials might own fewer homes and make less money — but they're on track for a better retirement.
- Older millennials will be able to replace more of their income in retirement than Gen X and baby boomers.
- Increasing automatic enrollments in 401(k) plans contributes to earlier and more significant savings.
Millennials might be behind on homeownership and earnings rates compared to older generations, but they're ahead in another significant way.
When older millennials now earning a median salary hit retirement age, they'll be able to replace 60% of their pre-retirement income with Social Security and savings from other sources like 401(k)s and individual retirement accounts, according to the data. In contrast, Gen Xers and the youngest baby boomers are on track to replace roughly half of their paychecks in retirement.
Many older millennials are in a better position for retirement thanks to an increase in default 401(k) plans, as automatic enrollments contribute to earlier and more significant savings — money baby boomers and Gen X employees who waited to enroll missed out on, per the research.
And it's a good thing, too: Millennials have far less retirement security than their parents or grandparents due to a combination of social security solvency concerns and the widespread replacement of pension plans with defined-contribution plans like 401(k)s, factoring investment decisions into retirement income, USA Today reported.
"There's not that much financial education in college, which is why automatic enrollment is helpful," 34-year-old Kenneth Adams, who was automatically enrolled in a 401(k) when he graduated from college in 2012 and started working as an engineer at a tech company, told the WSJ. "It gives you a default savings option until you educate yourself on what the 401(k) can do for you."