Millennials more retirement ready than boomers, study finds

investmentnews.com:

It’s been said the younger you are, the more knowledgeable you are. From tech-savvy hacks to gym routines and now — life savings?

That’s right — a recent study from Vanguard found that millennials, those between 37 and 41 years old, are on track to replace 58% of their pre-retirement earnings, while “late boomers” — defined as those 61 to 65 — will only be able to replace 50% of their earnings.

While this may seem like a positive forecast, neither of these stats are what they should be. Vanguard estimated that both groups would need to replace 83% of their pre-retirement income to meet their spending needs. Nevertheless, millennials are closer to reaching that goal than boomers.

The study found that new innovations like automatic enrollment, automatic escalation and investments in target-date funds, are the main reason why millennials are in a better position than their parents or grandparents.

“The combination of these enhancements has made it easier for retirement savers to join their workplace plans, increase their savings rates over time, and invest in diversified portfolios appropriate for long-term financial goals,” the study said.

Colin Day, financial advisor at Correct Capital Wealth Management, says he sees the same thing working with his clients.

“The target-date fund is probably the most interesting thing there,” Day says. “That wasn’t an option for many folks that were establishing their careers. If I’ve learned anything from my decade-plus working with group retirement plans, once somebody is in a fund, they’re probably going to be in it for a while.

“I have never run into someone who said they wished they didn’t save that money if they were auto-enrolled or increased through an automated feature,” he added.