Generation Z members are saving for retirement at a much higher rate than younger workers did in 2006, according to new Vanguard research.
In 2006, 30% of employees between the ages of 18 and 24 participated in their company’s 401(k) plan, compared to 62% in 2021. The reason for the rise is his 2006 law that paved the way for the widespread adoption of automatic enrollment in retirement plans. With this plan design, employees are automatically enrolled in the company’s retirement plan and must opt out if they do not wish to participate.
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Generation Z members are saving for retirement at a much higher rate than younger workers did in 2006. new research From Vanguard.
In 2006, 30% of employees between the ages of 18 and 24 participated in their company’s 401(k) plan, compared to 62% in 2021. The reason for the rise is his 2006 law that paved the way for the widespread adoption of automatic enrollment in retirement plans. With this plan design, employees are automatically enrolled in the company’s retirement plan and must opt out if they do not wish to participate.
In 2006, 11% of plans in Vanguard’s survey sample offered automatic enrollment. That percentage rose to 50% of the plan after 15 years. In 2021, the survey found that he participated in nearly 90% of all Gen Z employees, compared to only 1 in about 4 Gen Z employees in the voluntary plan in 2021. I was.
Dave Stinnett, Head of Strategic Retirement Consulting at Vanguard, said: An early start leads to better results down the road.
Not only have more young workers entered the scheme, but they are also more likely to maintain a good investment mix than in 2006, the report found. This is due to the widespread adoption of target date funds as the default option for 401(k) plans. These funds lock in investments in the investor’s projected retirement year and automatically adjust to become more conservative over time.
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Young people have decades to retire, so they can afford to allocate more of their portfolios to equities, about 90% or so.
Please contact Elizabeth O’Brien at elizabeth.obrien@barrons.com.
