Youngest employees stand to benefit the most from participating in retirement plans as they have the longest time frame to allow their investments to grow before they need them. But, historically, they've been the least likely to participate.
That may be changing.
A whopping 64 percent more employees between ages 18 and 34 started contributing to 401(k) plans last year compared to 2013, according to a new Bank of America Merrill Lynch analysis of the 2.5 million people participating in the retirement plans the company administers. (Tweet This) The increase helped boost overall participation to nearly 80 percent among American workers with access to plans, up 2 percent from the previous year.
Some of the growth might be explained by improvements in the economy and job market. "Millennials are feeling a little more stable post-financial crisis," said Steve Ulian, BofAML's head of institutional business development.
But the rise of auto-enrollment programs and new streamlined sign-up processes have also played a big role in drawing in young workers.
Research has found participation rates jump overall after companies adopt auto-enrollment programs, but the difference is particularly dramatic among younger employees. One report published this spring by BMO Retirement Services, for example, found participation rates among workers 25 to 34 years jumped 22 percent in plans with an automatic-enrollment feature. And for workers under 25, participation in auto-enrollment plans was more than double that in voluntary enrollment plans (29 percent versus 68 percent).
Bank of America Merrill Lynch found that 64 percent of clients offered retirement plans in 2014 that not only had automatic-enrollment features but automatic annual contribution increases as well, a 25 percent jump from 2013.