Empower Institute: A Generation of Young Workers First to Benefit from Retirement Plan Modernization
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Millennials - those who were born after 1981 - are on track to replace 75 percent of their income in retirement compared to Generation X workers who are on track to replace 61 percent and baby boomers who are on track to replace 58 percent, according to an
The landmark Pension Protection Act of 2006 - enacted at the time when millennials began entering the workforce - allowed automatic enrollment of plan participants, automatic escalation of participants' contributions and acknowledged the significance of employer contributions to employee accounts, among other reforms. In the ensuing 12 years, the reforms allowed by the legislation have made it possible for defined contribution plans to offer a new mix of innovative components.
Today, 41 percent of millennials responding to the
"New features such as auto enrollment and auto escalation have come a long way in making access to retirement savings programs easier for employees and in shaking off some of the concerns of the past with earlier DC plan designs," said Edmund F. 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 results include a Retirement Progress Score (RPS), which is a numeric estimation of the percentage of working income that American households are on track to replace in retirement. The survey results show the median projected income replacement among all the survey participants is 64 percent - meaning Americans, on average, are on-track to replace 64 percent of their current income in retirement.
Murphy noted that there is an 11-point difference in median income replacement percentages among participants across all generations who are enrolled automatically into DC plans versus those who opted into a plan. Changing attitudes about retirement planning The survey reveals that attitudes about retirement planning differ among the generations. For example, millennials have the least investable assets now compared to Gen Xers and baby boomers who have been in the workforce longer; however, they are seeking advice and have formal retirement plans in higher rates than older generations.
Keywords for this news article include: Empower Retirement, Finance and Investment.
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