Answer (courtesy of Bloomberg): About 1/3

Why is this important?

Pensions are becoming increasingly scarce for young people, so the 401(k) will likely become the primary source of financial support for retirees outside of Social Security:

According to a Pew Charitable Trusts analysis of survey data released Feb. 15, only 10 percent of workers over age 22 have a traditional pension. Just 6 percent of millennials have a pension while 13 percent of baby boomers do.

Why are so few contributing to their 401(k)? Here are a few theories:

Another problem made clear by the new report is that many workers simply don’t know their company 401(k) exists. Workers also might never get around to filling out the paperwork, or could be intimidated and confused by the need to make investment decisions. Companies can help solve all those problem by automatically signing up eligible workers, and requiring them to opt out if they don’t want to participate. Doing so has been proven to boost enrollment, but momentum has now stalled for automatic 401(k) features.

I wonder what role student loans also play in millennials not contributing to 401(k)s.

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What can you do to help increase the participation in a 401(k)? Check out the NGPF case study “Compound My Interest in 401(k)s”  that we developed to specifically help students through the process of making investment selections in a 401(k) plan.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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