Three things to know about DC plan participants under 30 - J.P. Morgan Asset Management
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Three things to know about DC plan participants under 30

Contributor Catherine Peterson

J.P. Morgan’s latest defined contribution (DC) plan participant research reveals saving and investing preferences among participants under 30 years of age. Our findings may assist plan sponsors and advisors in guiding these investors to a financially secure retirement. Survey results indicate that members of this large and influential age group—which will be working its way toward retirement for the next 35 to 45 years—are not only supportive of a more “automatic” DC plan, but they also expect their employers to play a vital role in helping them save and invest for retirement.

Here are three critical findings from our research on the attitudes toward saving and investing among the youngest members of the U.S. labor force.

  1. A majority identify as “do it for me” investors.

    Our research shows that, despite their generally accepted reputation as self-assured and independent, those under 30 are more likely than those 30 and over to classify themselves as “do it for me” investors (69% vs. 56%). These youthful investors say they want help selecting their investments and prefer to leave most of the ongoing investment decisions to experienced investment professionals (vs. “do it yourself” investors, who prefer to take a more hands-on approach). They are also more likely than those over 30 to appreciate receiving notifications from their employer if they are not saving enough (62% of those under 30 vs. 34% of those 30 and over).

  2. In general, they expect their employers to take responsibility for helping them save and invest for retirement.

    These young employees, less experienced in managing their own finances—and admittedly a long way from retirement—are more likely to assign at least some degree of responsibility to their employers for helping them save for retirement (82% vs. 73% for those 30 and over). What’s more, half of those under 30 think their employer has an obligation to help them choose the right investments, compared with only 22% of their older colleagues.

  3. They are among the strongest proponents of the “automatic 401(k).”

    Our research and experience suggest that some plan sponsors may be reluctant to adopt the automatic 401(k)—a term we use here to refer to a plan that utilizes some combination of automatic plan features, qualified default investment alternatives (QDIAs) such as target date funds (TDFs), and re-enrollment1—for fear of employee pushback. Yet our participant research indicates an encouraging level of support, particularly among participants under 30, for these plan features, as well as asset allocation strategies, that may help automate and simplify employee retirement-related decisions while leaving the ultimate choice in participants’ hands. A large majority are in favor of or at least neutral toward automatic enrollment (84%) and automatic contribution escalation (86%), and the group is close to unanimous in its support of target date funds and re-enrollment (Exhibit 1). Rather than seeing the implementation of the automatic 401(k) as an example of employers overstepping their roles, participants, especially those under 30, appear to appreciate and to some extent expect their employers to proactively help them get and stay on track for a secure retirement.

“Under 30s” are the strongest proponents of the automatic 401(k)

EXHIBIT 1: PERCENTAGE OF PARTICIPANTS IN FAVOR OF OR AT LEAST NEUTRAL TOWARD THE PLAN FEATURE/STRATEGY

a Annual increases of 2% of salary up to 10%.
b Starting contributions at 6% with automatic increases of 2% every year until contributions reach about 10% of pay.
c Appeal of TDF % shows those who find TDFs “somewhat” or “very” appealing.
Note: 2016 total n=1001; under 30 years old n=109; 30 years old and over n=892.
Source: J.P. Morgan Plan Participant Research 2016.

Implications for plan sponsors and advisors

Getting these young employees on the right track now, early in their careers, can allow the benefits of consistent saving and age-appropriate asset allocation to compound over their working lives. The good news is, those under 30 recognize the challenge they face in saving and investing for retirement and appear very receptive to the knowledge, tools and guidance that employers and advisors can provide. These findings may help assure plan sponsors that their efforts to strengthen their plans and proactively place employees on a solid path to a secure retirement will likely be met with support among current and future generations of participants.

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Source: J.P. Morgan Plan Participant Research 2016. The online survey of 1,001 DC plan participants was conducted in January 2016.

1 A plan re-enrollment is a process by which participants are notified that their existing assets and future contributions will be invested in the plan’s qualified default investment alternative (QDIA), which may be a target date fund, based on their date of birth. All participants’ assets are automatically moved into the QDIA on a certain date unless the participant makes a new investment election during a specified time period. Before conducting a re-enrollment, plan sponsors must engage in a prudent process for determining whether a re-enrollment is appropriate for the plan and its participants.


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TARGET DATE FUNDS:Target date funds are funds with the target date being the approximate date when investors plan to start withdrawing their money. Generally, the asset allocation of each fund will change on an annual basis with the asset allocation becoming more conservative as the fund nears the target retirement date. The principal value of the fund(s) is not guaranteed at any time, including at the target date.

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