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Baby Boomers still lead in total participitation, but the youngest generation in the workforce leads growth in use over past five years.

The generation furthest from retirement is suddenly the most interested in 401(k)s, according to a new study from Wells Fargo.

Millennials are leading the way in joining the retirement savings plan over the past five years, with over 13.3 percent adding some type of 401(k) plan over time. They also lead both baby boomers (80 percent) and Generation X (77 percent) in diversifying their plan.

That’s not a bad jump for a generation where over a third of its members didn’t even know what a 401(k) was. But what caused the change from money-indifferent to financially savvy? Don’t be so quick to call them “geniuses.”

Millennials starting to save more

Even though they are leading the pack in growth, millennials still have a long way to go before they have the most people using 401(k) accounts. In 2016, 59.4 percent of millennials had some type of retirement account, falling behind both boomers (66.1 percent) and Generation X (63.6 percent) in total use.

That double-digit growth millennials experienced is part of a greater trend for them, as more are starting to save and consider their options for the future. Part of that comes from them becoming more conservative with their spending in favor of saving, but they are also working to maximize what their employers are giving to them.

According to the study, 30 percent of millennials maximize what their employers match into their account compared to 27 percent of Gen Xers and 25 percent of baby boomers. They also keep in mind their taxes when making an account, as 16 percent of the generation uses Roth 401(k) accounts..

Generation X are leading borrowers from their retirement accounts

Gen X came in second among all generations in growth, with 11 percent more using some type of 401(k) plan.  At the same time, a fourth of the generation are borrowing more from their plans to try and pay expenses that come from being in between the two other generations.

“This may be a case of sandwich-generation syndrome, in which people are juggling the challenge of raising kids and helping aging parents — all during a period of increasing financial complexity in their lives,” Wells Fargo’s director of institutional retirement Mel Hooker says.

That lending to pay bills may help in the short term, but in the long term is hurting their retirement prospects. Those who borrow will obviously have smaller savings, but also risk a smaller repayment period of the borrowed funds if they lose their job or take a new one.

“Unless you need the money for an emergency, however, it’s best to resist the urge to tap your retirement funds,” Hooker says. “And if you need to do it, be sure to understand the terms.”

Baby boomers take risks to stay conservative

Boomers are the kings of participation in retirement savings, but their extended use isn’t all good. According to the study, over half are using investment plans that are slower than they should be in granting returns.

With a required draw-down age of 70 and a half for 401(k) accounts, the baby boomers can risk not being ready for retirement. That can especially hurt those who are not financially literate, as a lack of money and a lack of knowledge is a bad combination for retirement.

“It’s important to encourage employees to create a plan for saving and stick to it,” Hooker says. “Consistency in contributions and diversification are a better path to success than chasing returns or trying to time the market, because retirement success is a long-term proposition.”

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Meet the Author

Ryan Lynch

Ryan Lynch


Lynch is a freelance writer for


401k, millennials

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