Millennials fretting about their financial future can take comfort in knowing they are on track to retire in a better financial position than they probably think.

Of all generational cohorts, older millennials are most likely to generate enough income to retire comfortably, according to Creditnews analysis of Vanguard data.

Specifically, millennials aged 37-41 have the greatest chance of landing a comfortable retirement.

Creditnews assessed retirement readiness using Vanguard's sustainable replacement rate, which represents the percentage of pre-retirement income an individual needs to maintain their lifestyle in retirement.

This replacement rate varies depending on the person's income as follows:

  • 25th income percentile - 96%
  • 50th income percentile - 83%
  • 70th income percentile - 68%
  • 95th income percentile - 43%

By this metric, early millennials in the 70th percentile of earners are the only demographic on track to come anywhere close to that coveted ratio. This cohort is expected to hit 66% of their annual salary at retirement, while Gen X lags at 53% and late baby boomers at 51%.

Defined contributions

One of the reasons millennials have successfully grown their nest eggs is that they tend to be more active in workplace retirement plans than other generations.

According to Fu Tan, Vanguard's Senior Investment Strategist, higher-income workers who participate in defined contribution plans have a brighter retirement outlook.

“In the past two decades, these workers have benefited from innovations such as automatic enrollment, automatic escalation of savings rates over time, and automatic investment in a mix of stocks and bonds consistent with a retirement goal,” she said.

There’s a good reason millennials are deciding to take retirement planning into their own hands.

With millions of baby boomers scheduled to start receiving Social Security in the coming decade, many younger Americans worry there won’t be enough benefits for them by the time they retire.

In fact, a new survey from Nationwide and Harris Poll found that 39% of millennials and 45% of Gen Z believe they won’t receive a dime of Social Security.

Americans still underestimate the costs of retirement

Despite the rosy outlook for millennials, experts warn that the gap between what people have saved and what they'll need in retirement will likely grow over time—especially if expected cuts to Social Security benefits materialize.

According to the 2023 Protected Retirement Income and Planning Study, many Americans “dangerously” underestimate the impact of healthcare costs on their retirement.

“It is incredibly hard for people to wrap their heads around what could happen to their health 10, 20 or more years into retirement,” said Jean Statler, CEO of Alliance for Lifetime Income.

According to the National Council on Aging, nearly 95% of people aged 65 or older suffer from at least one chronic condition. Treating such conditions could take a bite out of retirement savings as healthcare costs continue to rise.

Something to keep in mind no matter which generation group you fall into.