Millennials are increasingly enrolling in their company 401(k) but many aren’t showing up on payday for the free money.
So says consultant Aon Hewitt, citing data that indicate many workers in their 20s and 30s are not saving enough to take full advantage of their employer’s 401(k) match, thus walking away from extra money.
And probably damaging their long-term retirement prospects to boot.
Aon Hewitt said that its analysis of 3.5 million employees eligible for defined contribution plans show that younger millennials (ages 20–29) are participating at a rate of 73 percent, and older millennials (ages 30-39) at 77 percent. But many of them are not saving very much.
Almost 40 percent of the younger group and 31 percent of the older group aren’t meeting the threshold for the company match.
“Automatic enrollment has significantly improved participation in 401(k) plans for all employees over the past 10 years — but even more so for young workers,” said Rob Austin, director of retirement research at Aon Hewitt. “However, once they’re in the plan, young workers seem to fall victim to inertia with many continuing to save only at the default rate, or slightly above, and risking their long-term savings by not receiving the full employer matching contributions that are offered.”
According to Aon’s figures, this can be very costly.