Good News on Millennials' Finances

Millennials who are saving money in company 401(k) plans are saving a median 6% of their income, according to a new survey by asset manager T. Rowe Price Group. That figure for workers ages 18 through 33 isn't far behind the median 7% for the total of more than 3,000 401(k) savers who were surveyed and the median 8% for baby boomers, the group closest to retirement. Moreover, 40% of the millennials at an employer for a year or longer said their percentage contribution went up in the last year. (The data don't speak to young adults who aren't employed or who don't have workplace plans available to them.)

While millennials are sometimes described as financially illiterate, "they are trying to do the right thing" in saving for retirement, says Judith Ward, a senior financial planner with T. Rowe Price who spoke at a meeting with reporters on Wednesday. Well, maybe. But this generation has also gotten a strong shove in that direction, which Ms. Ward and colleagues at T. Rowe Price say is a good thing. Many companies automatically enroll new employees in a workplace retirement plan, typically defaulting them into a diversified target-date mutual fund based on their age.

A small number of plans—perhaps around 15% –provide for the percentage contribution to automatically escalate each year. Workers can override these defaults, but rarely do, notes Jerome Clark, who manages T. Rowe Price's target retirement funds. So these automatic features use workers' inertia "to their benefit," by getting them saving in a diversified portfolio, he says. T. Rowe Price has looked at the millennials in the 401(k)s it oversees who have been automatically enrolled, typically in target-date funds. Of them, 90% own only that single fund in their account, Ms. Ward says. "That is how we think it should be used," she says, since target-date funds are designed to be an all-in-one portfolio including a mix of stock and bond holdings.

With the push toward all-in-one funds, Ms. Ward says plans are "saving [workers] from themselves" and potentially poor asset-allocation decisions. Seventy-seven percent of millennials whose T. Rowe Price plans include automatic increases in contributions stick with the increases rather than opting out, she says.

Click through thes slideshow below to view six easy ways to put more money in your pocket.

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