Millennials are the first generation to fully benefit from improvements made to retirement plans over the last decade, according to a survey from the Empower Institute. They are on track to replace 75% of their income in retirement, compared to 64% for Americans overall, 61% for Gen Xers and 58% for Baby Boomers.
The Pension Protection Act of 2006 was enacted when Millennials began entering the workforce, and it paved the way for automatic enrollment and escalation, all the while acknowledging the significance of employer matches. Forty-one percent of Millennials are automatically enrolled in a defined contribution (DC) plan, compared to 38% of Gen Xers and 33% of Boomers. In addition, 38% of Millennials are in a plan with automatic escalation features.
“New features such as automatic enrollment and automatic escalation have come a long way in making access to retirement savings programs easier for employees and in shaking off some of the concerns with earlier DC plan designs,” says Edmund Murphy III, president of Empower Retirement. “Millennials are the first generation in the workforce to fully benefit from changes in the law made in 2006.”
The survey also revealed that 24% of Millennials have a formal retirement plan, compared to 19% of Gen Xers and 17% of Boomers. Forty-eight percent of Boomers think they will work at least part-time in retirement, compared to 44% of Gen Xers and 40% of Millennials.
Fifty-nine percent of Millennials think Social Security will be a source of income in retirement, compared to 73% of Gen Xers and 88% of Boomers.
Sixty-one percent of Millennials expect DC plans to be a source of income in retirement, compared to 55% of Gen Xers and 47% of Boomers.
“Millennials who have had access to defined contribution plans are taking charge of their retirement planning by setting up a formal plan and seeking professional advice,” Murphy says. “Those are two strategies that are likely to lead to better retirement incomes.”
The Empower Institute conducted the survey of 4,000 adults in partnership with Brightwork Partners, LLC.