It’s not surprising, but still disconcerting. Participation in 401k increases with age: Millennials have the lowest rates, and baby boomers the highest.
While it makes sense given 401k financial behavior, it’s the exact opposite of what needs to happen due the correlation between successful participant outcomes and the age at which they begin to save
The Pew Charitable Trusts studied the issue, finding that the “take up” (or adoption rate) of retirement plans when offered increases with age, education, and income.
Millennials were most likely to cite ineligibility as the reason for not participating. Gen Xers most frequently pointed to affordability. Baby boomers noted, about equally, problems with eligibility and affordability.
Employer matches to employee contributions can be an important motivator for all age groups, according to Pew.
“When a match is offered, take up rises by 15 to 15.5 percentage points in each generation,” it notes, before noting that access to plans also increases with age.
“As workers gain expertise and experience, they more often qualify for higher-paid jobs that are more likely to offer retirement benefits. Older workers also may be more likely than younger ones to stay in jobs long enough to become eligible for workplace plans.”
“Analysts and policymakers often talk about average participants, but averages often hide significant differences among elements of the population. A policy that helps the average worker may not help all workers. As federal and state legislators look at ways to increase retirement security for private sector workers, they will want to be aware of demographic differences in access and participation. Pew has examined some of these differences in earlier publications.”
The data show that younger workers are less likely than older workers to be offered retirement plans by their employers, Pew concludes.
“Millennials often cite a lack of eligibility as a reason for not taking up workplace retirement plans when they are offered. Many in this age group are new to the workforce or have recently changed jobs and may not meet employer requirements for participation. Gen Xers are more likely to cite affordability—balancing other claims on their paychecks—as a barrier to participating. Within each generation, higher household income and education increase the likelihood that a worker will take part in a retirement plan.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
