--- title: Gen Z Has a Huge Head Start on 401(k) Savings Compared to Older Workers. Here’s Why description: Thanks largely to auto enrollment at work, Gen Z employees are more likely than young workers in the past to have 401(k) accounts. authors: - name: Sarah Hansen role: Senior Writer url: https://money.com/author/sarah-hansen/ bio: Sarah Hansen is a senior writer at Money covering all things personal finance. Previously, she covered economic policy and capital markets on the breaking news desk at Forbes. education: Northwestern University, New York University at_money_since: 2021 articles: 347 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Shopping - Taxes social: - https://www.linkedin.com/in/sarah-m-hansen/ former_staff: true editors: - name: Brad Tuttle role: Senior Editor url: https://money.com/author/brad-tuttle/ bio: Brad Tuttle is a former senior editor at Money with over 10 years’ experience covering a vast number of personal finance topics, including careers, cars, travel, budgeting, investing, insurance, credit cards, consumer psychology, real estate, banking, and shopping and deals. education: Columbia University School of Journalism, MS at_money_since: 2014 articles: 366 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Shopping - Taxes - Technology social: - https://twitter.com/bradrtuttle - https://linkedin.com/in/brad-tuttle-834b225 former_staff: true published: '2023-04-06T17:28:59.000Z' modified: '2024-04-17T13:07:31.000Z' section: Retirement tags: - News word_count: 416 canonical: https://money.com/gen-z-401k-enrollment-rate/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Money jar titled 401k](https://img.money.com/2023/04/News-Genz-401k.jpg) Gen Z is getting a serious head start on [retirement savings](https://money.com/retirement-savings-for-20s/). A [new report](https://corporate.vanguard.com/content/dam/corp/research/pdf/generational_changes_in_401\(k\)_behaviors.pdf) from Vanguard finds that Gen Z’s [401(k)](https://money.com/what-is-a-401k-rollover/) participation rate in 2021 — 62% — was more than twice as high as the participation rate for similarly aged employees in 2006, which was 30%. 401(k) accounts are tax-advantaged retirement plans. Traditional 401(k)s allow workers to contribute pre-tax money that is then taxed upon withdrawal in retirement, while contributions to Roth 401(k)s are taxed up front and can be withdrawn tax-free in retirement. ## Automatic 401(k) enrollment boosts retirement savings Why are so many Gen Z workers embracing 401(k)s? Automatic enrollment. Many employers now enroll their new workers in 401(k) retirement plans as part of their onboarding process. A few decades ago, that practice was far less common. In 2006, just 11% percent of 401(k) plans offered automatic enrollment, according to Vanguard. By 2021, that number had ballooned to half of all plans. The change had a huge impact on the number of workers participating in retirement plans, and not just for Gen Z. Over those 15 years, Vanguard found the 401(k) participation rate for employees overall rose from 62% to 82%. Among plans with automatic enrollment, participation shot up to 94%. And it’s not just that more people are opening 401(k) plans — they’re contributing more to them, too. According to Vanguard’s data, the average deferral rate (the amount of their paycheck a worker allocates to their 401(k) each pay period) for all workers rose from 7.2% in 2006 to 7.7% in 2021. For Gen Z workers that rate rose from 4.8% to 5.4%. ## How to maximize retirement savings “While these effects are most pronounced for the youngest workers,” report authors Jeffrey Clark and Kevin Kukulkathe wrote, “greater use of automatic solutions will continue to improve allocations and savings outcomes for all generations.” Keep in mind Vanguard’s report only includes data from its own 401(k) plans. Some employers offer 401(k)s from different providers, while others offer different types of tax-advantaged retirement accounts like 403(b)s and 457(b)s. Individual savers also have access to other types of retirement accounts, like [IRAs](https://money.com/what-is-an-ira/) and solo 401(k)s. At the end of the day, however, the type of retirement account you use is less important than the habit of saving early and consistently. ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/gen-z-401k-enrollment-rate/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Retirement", "item": "https://money.com/retirement/" }, { "@type": "ListItem", "position": 3, "name": "401(k)", "item": "https://money.com/401k/" }, { "@type": "ListItem", "position": 4, "name": "Gen Z Has a Huge Head Start on 401(k) Savings Compared to Older Workers. 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