For a highly quirky generation, Millennials are never short of surprises. Here’s one: They’re set to have a huge population of millionaires. Ok, that might be over stating the case slightly.
But saving early and often is the key to long-term financial security. Nearly one in five Millennials saves 15% or more of every paycheck in a 401(k) plan new research shows, which puts them on track to building $1 million retirement portfolios.
Millennials can be annoyingly self-entitled at times, but they were at an impressionable age during the 2008 financial crisis, and many took its lessons to heart. For a large segment, saving is part of their psyche, similar to their grandparents who came of age during the Great Depression.
Among older generations, a greater percentage save 15% or more, according to Fidelity Investments. Some 29% of Gen Xers, for example, are socking away 15% or more. But older Americans have higher incomes and less time to save. The urgency is particularly acute among Boomers, who have beefed up savings late in the game.
But neither Boomers nor Gen Xers began saving as early as Millennials. Studies found that 71% of Millennials eligible for a 401(k) plan participate and that 70% of millennials began saving at an average age of 22. In comparison, Boomers started saving at an average age of 35.
Compound growth over an extra 10 plus years may double your nest egg by age 70, which is why some savvy Millennials are outpacing previous generations in building wealth.
The best way to ensure you reach your retirement goals is to make your savings increases happen automatically. In many plans, you can simply choose an auto-escalation feature, and it all gets done for you. By making this feature more widely available or setting it as a default, employers can help make more 401(k) millionaires.
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