More eligible workers are participating in 401(k) plans administered by Wells Fargo, as increased auto-enrollment is bringing more millennials and lower-paid workers into the retirement savings fold. That’s according to new numbers released by the bank’s retirement services arm, which administers plans for 3.8 million participants.
The number of participating eligible employees rose 13 percent between 2011 and 2015.
As of now, 40 percent of Wells-administered plans offer the auto-enrollment feature, compared to 30 percent in 2011, according to a statement from Wells.
That has meant more participation from younger workers, new hires, and lower-earning workers.
Participation among millennials has reached 55 percent of eligible participants, compared to 45 percent in 2011. New hires with one year under their belt are participating at a 48-percent clip, up from 36 percent four years ago. And employees making between $20,000 and $40,000 are utilizing the 401(k) option at a rate of 59 percent of eligible participants, up from 47 percent in 2011.
Joe Ready, head of Institutional Retirement and Trust at Wells Fargo, thinks the industry drumbeat of retirement savings’ imperative is showing signs of taking hold.
“I get very excited when I see the percentage of employees enrolling in plans ticking up over the last four years because it tells me people understand that participation in their workplace retirement plan is vital,” he said in a statement.
“We know that systematic, pre-tax savings and investing works. The first critical step along that journey is to get people in the plan,” he added.
But as participation rates have improved, employees’ deferral rates have remained flat since 2011. These days about 38 percent of all participants defer at least 10 percent of their salary, a slight increase from 34 percent four years ago: 28 percent of millennials contribute at least that much, compared to 35 percent of Gen Xers and 45 percent of baby boomers.
About two-thirds of all participants are contributing enough to take advantage of their employers’ match: 54 percent of millennials utilize the offer, compared to 63 percent of Gen Xers and 70 percent of boomers.
The average balance across all demographics is just over $93,000, up from $69,800 in 2001, an increase Wells Fargo attributes to returns in the vastly improved stock market over that period.
“What we really need to see is a more robust increase in how much people are saving,” said Ready.
Roth 401(k) utilization has moved to 12 percent of participants, driven by millennial enrollment, proving their improved conscious engagement, as enrollees are not automatically deferred into Roth savings plans, which invest after-tax earnings in exchange for tax-free distributions in retirement.
Millennials also prove to be the best-diversified demographic, with 82 percent of younger workers meetings Wells’ basic diversification standards, which means a portfolio consisting of a minimum of two equity funds, one bond fund, and no more than 20 percent of assets invested in company stock.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
