Millennials Saving with 401(k)s in Record Numbers
October 27, 2014
During the first six months of 2014, Millennial enrollment in 401(k) savings plans increased by 55 percent, reports Dan Kadlec at Time.com.
Why are young people enrolling in the plans at such record rates?
- Partly, the increase is due to the increase of Millennials in the workforce, as they now make up one-quarter of the labor market.
- However, that is only part of the reason, as 401(k) usage has increased for workers of all ages. Those enrolling in the plans for the first time rose 37 percent during the first quarter of this year, according to Bank of America.
- Employers are using auto-enrollment to automatically put their workers into the plans, as well as automatic contribution increases. During the last year, the number of plans automatically enrolling new workers and increasing contributions rose by 19 percent.
- Companies are beginning to offer investment advice online and through mobile device apps. During the first six months of 2014, the number of people who accessed financial education information through mobile devices increased by 41 percent, and the number of businesses offering advice online, via mobile device or in person rose by 6 percent.
Those who participate in 401(k) plans have significantly greater savings than those who do not, says Kadlec. However, he notes that the Millennial generation is hardly in perfect financial shape. Not only do they tend to carry large debt, but they are more likely to make 401(k) withdrawals early and are less likely to utilize Health Savings Accounts.
Source: Dan Kadlec, "Why Millennials Are Flocking to 401(k)s in Record Numbers," Time.com, October 23, 2014.
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