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The digital generation is providing some hope for the retirement crisis. After watching their parents suffer through two major financial bubbles and the weakest economic recovery on record, the majority of millennials are placing money aside for retirement — as long as they have a job.
Read more: Are Millennials Conservative Investors?
America’s youngest workers are already emerging as a class of “super savers.” According to a new report from the Transamerica Center for Retirement Studies (TCRS), 70 percent of millennials – those born after 1978 – are saving for retirement and started at the unprecedented young age of 22. Those participating in a 401(k) or similar plan with a company match have a median contribution rate of 10 percent. In 2014, their estimated median amount of savings increased to $32,000, compared to only $9,000 in 2007.
“Many millennials began entering the workforce coincident with the Great Recession. It might be easy to conclude that their prospects for achieving a financially secure retirement are iffy at best,” said Catherine Collinson, president of TCRS. “Much to our surprise and delight, our research found employed millennials to be an emerging generation of retirement super savers. In fact, millennials are twice as likely to frequently discuss retirement compared to their parents’ generation.”
Six out of 10 millennials plan to retire at 65 or sooner, despite holding major concerns about the future. Forty-one percent believe they will need to provide monetary support to aging parents or other family members. Furthermore, 81 percent are concerned that Social Security will be history by the time they retire. “Millennials are naturally concerned about the future of their Social Security benefits given current forecasts,” says Collinson. “The first millennials will start turning 67 more than three decades from now, in 2046.”
TCRS offers the following three strategic steps for achieving retirement readiness and success:
- Save for retirement. Start saving as early as possible — and as much as possible to maximize potential compounding of investments. Save consistently over time. Avoid taking loans and early withdrawals from retirement accounts as they can severely inhibit the growth of long-term retirement savings.
- Calculate retirement savings needs, develop a retirement strategy, and write it down. In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance.
- Get educated about retirement investing. Whether relying on the expertise of professional advisers or taking a more do-it-yourself approach, gain the knowledge to ask questions and make informed decisions. Seek assistance from a professional financial adviser, if needed.
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