A new class of graduates and interns is entering the workforce this summer, and many will be making retirement planning decisions for the first time. The challenge: retirement feels far away when you’re balancing an entry-level salary, rent, and student debt. The opportunity: one dollar saved at 22 goes much further than one saved at 52.
A recent Employee Benefit News article explores why younger employees are least likely to participate in employer-sponsored retirement plans—and what plan sponsors can do about it.
Vanguard’s 2025 How America Saves report found that just 54% of employees under 25 contributed to their employer’s plan in 2024. By comparison, more than eight in 10 employees between 35 and 64 participated. Tenure matters too: 70% of eligible employees with less than two years on the job participated, compared with nearly 90% of those with four or more years.
“They certainly don’t need 40-page PDFs with dense, jargon-heavy language,” said Harlyn Kassardjian, director of strategy and business operations at Betterment at Work. “They need three questions answered: ‘What does this cost me today?’ ‘What’s the immediate benefit?’ and ‘How does it grow over time?'”
Mindy Yu, senior director of investing at Betterment at Work, said it’s more important for young professionals to invest in something than to obsess over picking the right funds or the perfect allocation. “That paralysis costs them years of growth,” Ms. Yu said. “The real advantage of a 401(k) is the time your money has to compound once it’s invested.”
Plan design can make a real difference. Vanguard found that automatically enrolled employees had a 94% participation rate in 2024, compared with 64% for those in voluntary enrollment plans. The gap was even wider among newer employees: those with less than two years of tenure who were automatically enrolled participated at more than twice the rate of their voluntarily enrolled peers.
Features like simple enrollment processes, automatic enrollment, and automatic contribution increases can help employees start saving, stay invested, and build their balances over time. “People can always opt out,” Ms. Kassardjian said, “but most are glad to stay in and don’t necessarily miss those few dollars that they would see in their paycheck.”
For plan sponsors, the employees who need the most help getting started are often the ones least likely to act on their own. Smart defaults can close that gap—and give younger workers the one thing they can’t get back later: time.
