When they were not automatically enrolled, just 13.4% of Millennials participated in employers’ plans—a drop of 22% in the past year. The rate of participation at companies that auto-enroll employees was nearly five times that, data from Wells Fargo Retirement found.
Among those who do contribute, Millenials’ savings rates are dangerously low, with almost half (47.3%) putting away 3% of salary or less. This is a modest improvement from last year’s 49.7%, and comparable to the members of Generation X (32.8%) and Baby Boomers (24.9%) who contribute at the same rate.
“Getting into the plan is the first step, but saving at a rate of 3% or less isn’t going to get them [participants] to a financially viable retirement,” said Laurie Nordquist, director of Wells Fargo Institutional Retirement and Trust.
The percentage of Millennials doing all three key things to save for retirement—participating, contributing at an adequate rate and being appropriately diversified—is just 5.2%, down slightly from 5.5%.
Most of Millennials’ participation can be attributed to automatic features in company plans, Nordquist added, suggesting that automatic escalation may be needed to encourage higher savings rates.
Recognizing and responding to Millennials’ attitudes and behaviors can also help direct their focus away from short-term savings concerns and toward retirement. Nordquist suggested reaching out to younger participants through “an expanded social media effort, enhancing delivery preference options available to participants, increasing the frequency and delivery options for webinars, and using QR codes for smart phones.”
Additional findings include:
- All generations are seeing a gradual increase in the use of managed investment products. Millennials are the highest, at 85.8%;
- Millennial usage of managed investments is up 2.9%, compared with 4.3% for Gen X and 4.7% for Boomers; and
- Millennials are the most frequent users of Roth 401(k) contributions, with 14.3% contributing Roth dollars when the feature is available—a year-over-year increase of 16%—compared with 9.4% for Gen X and 5.8% for Boomers.
This data is based on analysis of 1 million eligible Millennial participants in retirement plans that Wells Fargo administers.