The best way to boost retirement savings? Keep it simple — and automatic.

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The best way to boost retirement savings? Keep it simple — and automatic.
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The total participation rate of employer-sponsored retirement plans rose from 62% in 2001 to 82% in 2021, a new study showed. For plans with automatic enrollment, the rate rose even higher to 94%.

The widespread adoption of automatic enrollment and investment options has helped boost savings rates among all generations, and especially among younger workers who entered the workforce after these innovations were introduced, a new study from Vanguard has found.

“If the industry had never implemented these functions, we’d see very modest growth in savings. These innovations really leapfrogged retirement success,” said Dave Stinnett, head of strategic retirement consulting at Vanguard. With the creation of the 401 plan in 1987, baby boomers were the first generation to have access to such defined-contribution retirement plans for a meaningful portion of their careers. Meanwhile, millennials were the first generation to benefit from automatic enrollment and automatic-investment solutions during their early working years.

Although millennials have lived through two significant equity bear markets, their allocation to equities was higher in 2021 than in 2006 because they used target-date funds, Vanguard said.“The youngest workers, having grown up in these financial crises, you might think that would spook them. But the data shows something entirely different — younger workers to a greater degree became bigger savers,” Stinnett said.

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