Fortunately, the last few years have taken some of the heat off Millennials as the next youngest demographic cohort, Generation Z, does its own things to confuse and alienate old people. So, Zoomers, on behalf of my generation to yours, thank you. Keep the fun TikTok dances and equally informed foreign policy takes coming.
Meanwhile, Millennials will continue to quietly subvert expectations.
For some of us, the evidence has been building for a while that Millennials, as a group, actually seem to possess better financial instincts than prior generations. The latest data point supporting this hypothesis comes in a new report from Vanguard, the largest provider of mutual funds.
When it comes to retirement savings, Millennials are outperforming their elders. For its research, Vanguard compared pre-retirement income and savings at different income levels to the amount households would need to amass in order to retire comfortably.
Millennials were found to be more likely to retire comfortably than Baby Boomers at every income level except at the lowest quartile for income. At that level of income, Millennials and Baby Boomers were found to be equally on track for retirement.
The differences between Millennial and Baby Boomer savers were especially pronounced at higher income levels. For instance, of the age cohorts examined, Millennials at or above the 95th percentile for income were 22 percent ahead of their high-earning Baby Boomer counterparts in exceeding the calculated sustainable replacement rate (defined as the highest level of consumption as a share of pre-retirement income capable of being sustained in 90 percent of market-return/mortality scenarios). I must say, I do appreciate “mortality scenarios” as a euphemism for “death.”
Not to leave out Gen Xers (no matter how much they may be used to it): Members of Generation X also outperformed Baby Boomers with their retirement savings at every income level except the lowest (where they were just slightly behind). Members of Generation X saving for retirement couldn’t keep up with Millennials though: They were fairly substantially outpaced by Millennial savers at nearly every income level.
Although I would love to attribute the good qualities of my generation to our grit and determination in the face of several economic catastrophes as we entered the workforce, so as to rub it in the faces of the naysayers who blamed the financial struggles of young people on the irrepressible impulse to dine on overpriced avocado toast, boring old policy changes (as they often do) probably deserve most of the credit.
In recent years more employers have embraced the automation of both enrollment in and increasing contributions to 401(k) plans. Vanguard noted in its research that automatic retirement account enrollment leads to a 91 percent participation rate, whereas when savers need to opt-in to a retirement savings plan only 28 percent choose to do so. By the time they retire, Millennials will have had much more time than Baby Boomers in a labor market in which automatic retirement savings plan enrollment is the default.
So, even if all they did to accomplish it was fail to login to change the default setting of an account, I suppose Millennial retirement savers deserve congratulations. The market has been on a tear of late, and with December typically being a particularly good month for stocks, more gains are likely on the way. It feels nice to see a big number when you get around to examining your retirement account statements, particularly when it’s bigger than more experienced savers ever thought it would be.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at firstname.lastname@example.org.