Efforts to coax younger workers into their 401(k) plans are coming up drastically short, according to new studies showing that fewer than half of all eligible workers in their 20's participate in voluntary company retirement plans, the Associated Press reports.
Wayne Gates, general director of market research and development at John Hancock Financial Services, Inc, noted that younger workers are tuning out traditional educational messages touting the benefits of long-term investing. Cynical members of Generation X and Y surveyed by Cigna Retirement Corp. cited various excuses ranging from mistrust of corporate America to fear of geopolitical developments as reasons for abstaining from their qualified plans. Baby Boomers paid far less attention to these factors.
Cutbacks in employer-sponsored benefits, such as defined contribution matching policies, also contributed to apathy for long-term savings among younger workers. As an example, only 41% of all U.S. employees between the ages of 21 and 24 have access to employer-sponsored retirement plans, whereas 54% of all workers between the ages of 25 and 34 enjoy those types of benefits, according to the Employee Benefit Research Institute.
The transitional nature of younger workers also contributed to widespread delinquency from retirement plans. Some younger workers said they discount vested employer 401(k) matches that lock them into jobs for up to five years. Gates is part of a growing chorus of financial service executives calling for automatic 401(k) enrollment as a means of combating low 401(k) participation rates among younger workers. Currently only 14% all 401(k) plans include automatic enrollment provisions, according to Hewitt Associates.