The report indicated that the saving trends for employees of all age groups were encouraging. During the first-half of the year, the number of first-time contributors increased by 37% while the number of millennial contributors rose to 55%.
According to Bank of America Merrill Lynch, the saving behavior of millennials is critical because their generation may need to cover the majority of their retirement expenses.
Based on the latest study of the firm and Age Wave, millennials depend primarily on their personal savings and income to fund most of their retirement. Other generations rely on social security and pension.
Health Savings Account (HSA) usage increased
During the first six months of 2014, health savings account (HAS) usage increased 33%. More than 384,000 workers are now using such tax-advantage vehicle to prepare for qualified near-term and long-term medical expenses, according to the report.
Baby boomers represent 38%, and Gen Xers account 39% of the account holders. Twenty-three percent (23%) of millennials are using HSA early in their careers.
“Although Baby boomers and members of Generation X are most likely to own HSAs, Millennials also find these accounts attractive. Millennials’ adoption of HSAs early in their careers is encouraging, given rising health care costs, as well as longevity increases and other factors,” according to the report.
Bank of America Merrill Lynch also noted that millennials are taking positive savings actions for retirement. Almost 40,000 of them enrolled in their employers 401(k) plan for the first time during the first half, an increase of 55% compared in the same period last year.
David Tyrie, head of retirement and personal wealth solutions at Bank of America Merrill Lynch commented, “Seeing younger generations more vigorously engaged with workplace savings vehicles is encouraging. These actions represent significant steps toward achieving long-term financial wellness in an era of rising health care costs, increasing longevity and self-reliance due to fewer pension plans.”
Employers make saving for retirement easier, automatic
The report found the employers continue to find proactive ways to help their employees achieve their goals for retirement and improve their overall financial situation.
During the past 12 months that ended June 30, the number of 401(k) plans grew 19% (combining auto enrollment and auto increase features). Ninety-four percent (94%) of employers added auto enrollment and auto increase during the first-half of this year.
Plan sponsors are adding auto increase feature voluntarily to their plans with a 63% adoption rate during the past 12 months. The percentage of employees adopting the feature rose 27%.
“By further integrating how employees save for retirement and long-term health care costs, employers can help people see a more complete picture of their financial wellness and make informed choices,” said Steve Ulian, head of institutional business development for Bank of America Merrill Lynch.