Millenials and retirment plans

WABAC

Research by The National Institute on Retirement Security. Because sometimes it's nice to talk about facts. Are they a creditable organization? You be the judge.

The study is from 2014. I'm not convinced that conditions have gotten any better for the millenials.

Figure 1 shows that in 2014 Millennials (66.2%) had similar rates of working for an employer that offered employees a retirement plan as GenX (68.8%) and Boomers (67.6%). But, as displayed in Figure 2, a challenge to this generation is the fact that only a little over half of Millennials (55%) are eligible to participate in an employer-sponsored retirement plan, compared to over three-fourths of GenX (77%) and Boomers (80%).

Figure 3 shows that Millennials have high (94.2%) take-up rates when they are both offered and eligible to participate in a retirement plan sponsored by their employer. These high rates (94.2%) are nearly equal to the rates of Boomers (94.4%) and GenX (95.4%). As a result, a little over one-third of Millennials (34.3%) participate in an employer-sponsored retirement plan, compared (in Figure 4) with half of GenX (50.5%) and Boomers (50.9%). The rate at which eligible employees take-up an employer-sponsored retirement plan is about 95 percent for all generations.

As displayed in Figures 1 and 4, in 2014, nearly two-thirds (66.2%) of working Millennials had access to an employer-sponsored retirement plan. But, only a little over one-third (34.3%) of Millennials actually participated in an employer-sponsored retirement plan. This is because a much smaller percentage of Millennials (55%) were eligible to participate in the plan offered by their employer than in older generations.

So they have access, but they aren't eligible? Why is that?

A possible explanation for lower rates of retirement plan eligibility and therefore coverage is that the Millennial generation has a higher rate of part-time employment than GenX or Boomers. Figure 13 indicates that in 2014, the rate of part-time employment by Millennials (25.1%) was close to double the rate of part-time employment by GenX (13.6%) and Boomers (14.9%). The higher rate of part-time employment by Millennials is a large factor in their lower eligibility for employer-sponsored retirement plans, as they may not work enough hours to be covered by their employers’ plans.52 Under the Employee Retirement Income Security Act of 1974 (ERISA), employers can limit eligibility in retirement plans by requiring that an employee worked at least 1,000 hours in order to have a year of service under the plan.53Working 1,000 hours in one year is equal to working a little over 19 hours per week.

A second possible explanation for lower rates of coverage in a retirement plan is that this generation has not worked in their current position long enough to become eligible for participation in the plan. Figure 14 shows the length of time that Millennials have been employed with their current employer in 2014. Figure 14 also shows that over half of Millennials have only been employed with their current employer for at least a year (26.5%) or under one year (23.6%). These short tenures contribute to their lower eligibility rates, as their employer may not allow them to participate in an employer-sponsored retirement plan until after they have worked for the employer for one year of service.

A side bar addresses the second point:

There is a media-fueled perception that Millennials are perpetual job-hoppers.54 But two prominent studies show that this perception is a myth. First, a recent Pew Charitable Trusts study found that three-fourths (75%) of college-educated Millennials in 2016 were employed for more than 13 months with their current employer, compared to 72 percent of Gen Xers in 2000.55 Second, the U.S. Bureau of Labor Statistics in a study tracking Boomers throughout their work-lives, found that Boomers held short tenures with their employers during their younger years.56 Specifically, it found that of the jobs that Boomers began when they were 18 to 34, 69 percent of those jobs ended in less than a year and 85 percent ended in fewer than five years.57 Thus, Millennials are job-hopping at similar or even lower rates to their Gen X and Boomer predecessors.

Yeah? But what about the avocado toast?