Baby Boomers Use 401(k) Plans More Than Millennials

Participation in defined-contribution retirement plans varies by generation. Some of this difference is due to eligibility instead of affordability.

Participation in 401(k) plans and similar defined-contribution plans varies by generation. Baby boomers are far more likely to take advantage of workplace retirement savings plans than millennials. Some of this difference is due to eligibility instead of affordability.

The Pew Charitable Trusts analysis of 2012 census data found that just 25% of millennial adults (defined as those born in 1981 through 1990) participated in defined-contribution plans. In contrast, 43% of baby boomers participated an in 401(k) or similar type of plan.

Access is a factor. Millennials have faced problems in landing jobs offering retirement savings benefits. Underemployment among recent college graduates was at 12.6% in early 2016. Millennials are less likely to work enough hours to meet the requirements for participating in a workplace retirement savings plan. Compounding matters, college-degreed young adults are more likely to work in jobs that do not require a degree than in 2000. Combined, these factors help explain why 51% of millennials blame eligibility as the reason they don’t participate compared to just 39% of baby boomers. Millennials blame eligibility more than affordability as the reason for not participating (51% versus 34%). Baby boomers essentially blame both factors equally: 39% blame eligibility and 40% blame affordability.

Notably, even when education and income are accounted for, millennials are less likely to participate. Among those earning $100,000 or more, an 11-percentage-point difference exists in participation rates between millennials and baby boomers (80% versus 91%). There is a 10-percentage-point differential between those with a bachelor’s degree or higher (81% versus 91%). The gap is even wider at lower education levels: 58% participation rate for millennials versus 82% for baby boomers.

One factor that boosts participation across age groups is the employer match. When their employers match workers’ retirement savings contributions, 81% of millennials and 80% of baby boomers with access to a defined-contribution plan participate. When a match is not offered, however, just 56% of eligible millennials participate, versus 74% of baby boomers.

Source: “Retirement Plan Access and Participation Across Generations,” The Pew Charitable Trusts, February 2017.