Hard financial times often cause people to push retirement savings to the back burner, but this is not the case for all people, especially millennials. Millennials are surprising analysts by putting more in their 401k savings accounts than both Baby Boomers and Gen Xers.
Millennials typically have other expenses to pay for at this stage of life such as buying a car or a house, but they aren’t forgetting to separate their investments into multiple categories. The numbers show that roughly 74 percent of Baby Boomers are currently contributing to a 401k savings plan, while Gen X is slightly higher with 77 percent contributing, and Millennials are topping the charts with 81 percent of working individuals making some type of contribution to their retirement fund.
The reason that the generation is saving more is largely in part to technology and how easy it is to contribute to a retirement fund than it was in the past. They’re also aware of how tight the financial situation is right now and how important it is to save for the future. It’s easier to sign up for plans online, and with employers matching contributions, it’s no wonder that the generation is more than willing to cash in on what is essentially free money for retirement.
The amount that employees are contributing to plans is also on the rise. Compared to rates in 2015, average 401k contribution amounts are about 20 percent higher. This can partially be attributed to the rise in the stock market and more confidence in the overall financial outlook for the country.
Employers are also responsible for an increase in contributions. Many have made it easier than ever before to enroll and change contribution amounts through automated features such as auto enrollment and auto-increase. Auto-enrollment puts new employees in the 401(k) program and deducts the amount from their paychecks to go into the retirement account. If the employee receives a bonus or raise, their contribution amount is increased to reflect additional earnings.
The number of plans employing these features has skyrocketed, with a 153 percent increase in 2016 compared to numbers in 2015. Access to plans and benefits through mobile devices and apps have also made it easier for Millennials to put some of their current earnings away for retirement. There is more exposure to plans and the benefits that they offer to increase savings.