Millennials are Saving More For Retirement than Boomers and Gen X

Millennials are Saving More For Retirement than Boomers and Gen X

Thanks to automatic enrollment in 401(k) plans, the Wall Street Journal reports that Millennials are ahead of older generations in accumulating their nest eggs. While workers years ago had to affirmatively opt-in to 401(k) plans and actually choose their investment options, these tasks are now done for them, which has not unsurprisingly increased retirement plan enrollment.

However, the question remains whether investing their hard-earned money will pay off in the long run. Roughly 85 cents of every dollar invested in 401(k) plans is flowing into target date funds, a sum totaling about $85 billion per month. This money is invested passively in stocks and bonds, while at the same time active managers lose billions.

The question then becomes who is the marginal price-setter in the stock market, and the evidence strongly suggests indexing is the dominant arbiter of prices and the dwindling community of active managers has price-setting capability that diminishes each year, as passive gains more market share.

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