Retirement savings in the US grow across all age groups

Six years ago, the stock market crash and ensuing Great Recession left millions of Americans unemployed and unable to contribute to any type of savings plan. The good news: In the years since, retirement savings have bounced back by some measures.

Despite all the attention paid to insufficient total savings, median retirement savings among working-age households have grown considerably over the past five years, according to the 15th Annual Retirement Survey from the Transamerica Center for Retirement Studies. The survey tracked median retirement nest eggs among employed American baby boomers, Generation Xers, and Millennials between 2007 and 2014. For each age group, median savings either doubled or tripled within that seven-year span.

“We’ve seen a healthy increase in savings for employed people,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies based in Los Angeles, in a phone interview. The recession, she notes, “set off the alarm bells in a way that they weren’t ringing before and took [saving money] to a new level of urgency, and that’s a good thing. If we look at the national dialogue, it’s difficult to turn on the Internet, TV, or radio without hearing some form of conversation about the need for people to plan and save and think about their loved ones.”

Millennials, perhaps predictably, reported the most robust savings growth of the three groups, more than tripling their savings from $9,000 in 2007 to $32,000 in 2014. Xers, the first of whom will start turning 50 next year, doubled their nest eggs, from $32,000 to $70,000. For boomers, median savings increased from $75,000 to $127,000.

There are a few reasons savings are up, aside from increased awareness, Ms. Collinson notes. Defined contribution plans have mostly come to replace defined pension plans as the primary vehicle for retirement savings, giving more Americans stake in the financial markets than a generation ago. And the stock market has been on a tear for the past few years. Workers enrolled in defined contribution plans who were able to maintain employment through the recession “have really benefited from dollar cost averaging,” she says. That explains the savings surge for Millennials, many of whom entered the workforce at the bottom of the market to ride the bounce back. “It’s been a silver lining to the Great Recession,” Collinson says.

Another reason: People are working longer, and those extra years mean more time to build up resources for when they finally do retire.

The Transamerica report flies in the face of some of the more dire findings on Americans’ preparedness for retirement, particularly with the long-term future of Social Security a major question mark in many people’s minds.

A recent survey from Bankrate.com found that 36 percent of Americans had nothing put away for their post-work years, including nearly a quarter of Americans ages 50 to 64. And the National Retirement Risk Index, put out in 2012 by researchers at Boston College, estimates that just over half of American households are financially prepared to retire at age 66.

But such alarming statistics can overstate the problem, says Ben Harris, deputy director of the Brookings Institution’s Retirement Security Project, based in Washington. “The retirement security landscape is overall fairly sound,” he says. “For elderly, low-income households, Medicare and Social Security ensure a base level of well-being.”

Of course, a swelling percentage of Americans don’t think that Social Security will be there for them in their retirement years, including two-thirds of the Millennials surveyed in Transamerica’s study. But, Mr. Harris points out, “if you look at federal spending, elderly well-being has become the preeminent government objective. We spend more on that than anything else. That means elderly people do pretty well.”

There are still challenges, however, particularly for Americans who don’t have access to traditional employee-sponsored defined contribution plans.

“It is virtually impossible to save for retirement without income,” Collinson notes, and nearly as difficult for workers in part-time or low-wage positions.

From a practical standpoint, too, “effective saving can be really complex,” Harris says. “Anyone who has tried to roll over a 401(k) balance knows this. It takes a lot of effort to understand how to do it right, and we need to make it easier.”