New data from Vanguard Group show that younger employees are less likely to use their employer-sponsored defined contribution plan than their predecessors or their older co-workers. In its annual How America Saves report, the manager reported that the overall participation rate increased in 2017 to 72% from 71%, after falling in 2016. During the prior year, the DC participation rate fell to 71% from 78%.
Alternative savings options, such as robo-adviser-driven IRAs, have become popular among the younger age demographic, but rising education expenses and student debt have also factored into the equation. The majority of younger workers might not have enough left over after expenses to put away for a retirement that many see only in the distant future.
The declines in participation rates occurred despite more plans implementing auto-enrollment features (46%) and a greater percentage of employers (96%) providing a contribution.
Vanguard's How America Saves is an annual report of data collected from the company's 4.6 million participants under its record-keeping umbrella.