Younger workers today are participating in their workplace retirement plans at higher rates than they were 15 years ago, and they're saving more, according to new research from Vanguard.
In 2021, 62% of Generation Z workers — those between the ages of 18 and 24 — participated in the retirement plans offered through their employers, up from 30% of people in that age range who did so in 2006. Their average deferrals also ticked up to 5.4% from 4.8%.
Millennials too experienced a similar surge in plan participation and savings rates. In 2021, 83% of millennials — those between the ages of 25 and 40 — participated in their workplace plans, contributing an average of 6.7%. That's up from a 57% participation rate and a 6.1% average deferral rate in 2006.
The "good news" extended across all age cohorts, but was most pronounced for younger workers, thanks to auto enrollment and auto escalation that are now part and parcel of workplace plans, said David Stinnett, Vanguard's head of strategic retirement consulting, in an interview.
As more young workers participate in plans and contribute more, it creates a "better and better picture" for Americans' retirement readiness going forward, Mr. Stinnett said.
The data also quells fears that millennials and Gen Z workers might have been spooked by the 2008 financial crisis and the significant bear markets they lived through, Mr. Stinnett added.
Since the market crises created a "defining image in their minds as they grew to maturity," there was concern that they would be less likely to invest in the markets, he said.
As Mr. Stinnett sees it, the concern appears to have been unfounded. "Younger workers today are participating in their plan at higher rates than younger workers of years past, and they're saving more than younger workers of years past.
The data for the study was drawn from a subset of Vanguard record-keeping clients. It includes 219 defined contribution plans offered by the same set of companies in both 2006 and 2021.