Take That Boomer! Millennials Outpace Older Generations on This Retirement Front—and What It Means for You

Millennials are diving headfirst into saving for retirement. In 2016, 59.3% of baby boomers held retirement savings accounts. By 2022, the boomer participation rate had dropped to 57%, while their millennial-aged children had surpassed them, with a participation rate of 61.5%. 

Today’s workers have more retirement plan options than their predecessors. The 401(k) has become a popular investment vehicle among millennials, enabling many of them to amass substantial retirement savings before the age of 50. But they’ll need it—millennials also face unprecedented financial obstacles.

The Participation Gap Flips

Older generations have more saved—they’ve had more time. But here’s the twist: Boomer participation rates are dropping while millennial rates climb. Millennials now outpace their parents in retirement account participation, trailing only Gen X.

Why Millennials Participate More in Retirement Plans

According to the most recent U.S. Census data, more than half U.S. households hold retirement assets, which can mean a defined contribution plan, such as a 401(k), or an employer-sponsored defined benefit plan. A 2023 study conducted by Vanguard found that retirement plan participation rates increased by over 32% between 2006 and 2021 across all age groups.

Although many of their parents invested in defined benefit pension plans, millennials are more focused on 401(k)s.

Set It and Forget It Works

Boomers had traditional pensions with guaranteed income. Then came optional 401(k)s. The game-changer? Automatic enrollment—offered by just 11% of plans in 2006 but 50% by 2021.

“The primary difference between these two types of plans is that pension plans provide guaranteed income in retirement and 401(k) plans provide savings accounts, which you must figure out how to use in retirement,” said Megan Yost, senior vice president at Segal, a benefits and human resources consulting firm.

Another development that’s simplified retirement planning is the emergence of the target-date fund (TDF) option, which is now offered by many 401(k)s. Designed as long-term investments, TDFs include a mix of bonds, stocks, and other assets. Initially, TDF managers commit your money to riskier investments. However, as your retirement year approaches, the TDF will automatically reinvest in more conservative investments.

According to the Vanguard study, about half (47%) of automatic enrollment 401(k) plans offer TDFs.

Savings Challenges and Advantages

Millennials are the most likely generation to invest in a personalized retirement plan. They are open to seeking professional financial advice and expect retirement-related services, such as retirement strategy education, financial planning services, and emergency savings options, from their employers.

According to a study by the Teachers Insurance and Annuity Association of America (TIAA), 42% of young adults report living paycheck to paycheck, and two-thirds can’t afford a major unexpected expense. Overall, about 38% of young men save, compared with 30% of young women, who focus more on reducing debt. Savings rates also differ by demographic, with 36% of Hispanic workers saving money, followed by Black (33%) and white (29%) workers.

Although many millennials have embraced saving for retirement, they face a minefield of financial challenges:

Child Care Costs

Child care costs significantly impact household budgets. According to 2022 Department of Labor data, child care costs add up to $15,600 annually and around $9,211 for part-day care, for one child. On average, child care costs take up household budgets 8.9% to 16%. For some families, child care expenses exceed rent costs.

Medical Debt

Medical debt has now surpassed student loans as a top source of debt for Millennials, with 11% citing medical debt as their main source compared with 10% for personal education loans, according to the 2025 Northwestern Mutual Planning and Progress survey.

Home Costs

Among Millennials who are not currently homeowners, 58% say that owning a home will never be financially affordable—now or in the future, according to the survey by Northwestern Mutual. For those who feel priced out, 61% don’t have enough saved for a down payment, 50% say mortgage rates are too high, and 38% say the housing market is too competitive.

Meanwhile, about a third (31%) of Millennials say buying a house is one of their greatest affordability concerns, and 34% expect to reach this milestone later in life than their parents did.

“There are fewer single-family homes available today than when millennials’ parents were their age,” Yost said. “Home prices are much more expensive now than they were a generation ago. Interest rates are higher as well. The cost of rent has also outpaced inflation over this period.”

Nevertheless, Millennials Do Have Some Advantages

But millennials also have financial advantages that their parents didn’t have.

Digital tools make it easier for individuals to access advice, get financial education, budget, and track earnings and expenses. Plus, employers have revised their retirement plan options.

“Many millennials were just starting their careers during the global financial crisis, which affected their outlooks, expectations, and habits,” Yost said. “Employers have made many improvements to their 401(k) plans over the last twenty years to make retirement saving and investing easier.”

Retirement Savings Tips

Experts suggest making your retirement savings a priority as early as you can. When should you start? “Now, and always,” Silva said. “Millennials should be saving money and paying down debt as soon as possible and for life.” Here are some ideas:

• Contribute all you can afford to your employer’s retirement plan. Learn how the plan works, whether there are spousal benefits, and what happens to the plan if you leave the job. If your employer doesn’t offer a retirement plan, request that they start one.
• Even if your employer offers a 401(k) plan, invest in a Roth IRA as well on your own.
• Assess your personal needs to determine the amount of income you will need in retirement. Typically, workers need to retire with an income equal to 70% to 90% of their preretirement income.
• Educate yourself about investment principles. Find out how fund managers invest your money and how economic factors—such as inflation—will affect your nest egg.
• Try not to tap into your retirement savings before you retire, even for emergencies. If you do, you could lose tax benefits, along with accumulated principal and interest.
• Learn more about how Social Security benefits work. Typically, retirees report that Social Security benefits replace about 40% of their preretirement income.
• Seek professional investment advice and ask lots of questions.

The Bottom Line

Start saving now, regardless of age, if you can. Millennials lead in retirement plan participation rates but face unique challenges: child care costs that rival a mortgage or rent, homeownership costs so high that 58% say it’s permanently out of reach for them, and medical debt that has overtaken student loans as the leading debt they owe. Learn how your employer’s plan works and explore supplemental investments—you’ll need them.