Millennials are looking beyond beach vacations and nights out when it comes to finding the best way to use their cash.
More of them are putting money away for retirement, according to a new analysis released Thursday by Bank of America Merrill Lynch. About 40,000 workers in their 20s and early 30s signed up for their employer’s 401(k) plan for the first time during the first half of this year, the report found. That is up 55 percent from the same time last year and more than the 37 percent increase seen for all age groups.
“If you look at the Millennials, they’re actually by nature better savers,” says Kevin Crain, managing director and senior relationship executive for Bank of America Merrill Lynch. The bank analyzed data from its 401(k) business, which has $128.9 billion in assets and includes 2.5 million participants.
What’s pushing Millennials to be more responsible? It’s not all due to strong will power. More companies are taking the work out of the saving process by automatically enrolling workers into savings plans and automatically boosting their saving rates by a certain percentage amount each year, the report found. As of June, 213 plans used both auto enrollment and auto escalation to help people save, up 19 percent from a year earlier.
However, Millennials might deserve some credit for not opting out after being automatically signed up, Crain says. And some of the growth was due to choice: The number of people who voluntarily signed up for automatic rate increases grew by 27 percent over the past year, according to the report.
The higher saving rates might also be spurred by a feeling among millennials that they are on their own for retirement. Workers between the ages of 25 and 37 expect to receive 32 percent of their income in retirement from personal savings and investments, compared to 19 percent for baby boomers, according to a separate survey by Merrill Lynch and Age Wave. In contrast, millennials expect 12 percent of their retirement income to come from an employer-sponsored pension, compared to 19 percent for boomers.
