Millennials may be overly confident about their investing skills, but many are handling their 401(k)s with savvy, a new study (pdf) by Wells Fargo Institutional Retirement & Trust suggests.

Related: Millennials want financial hand-holding

More than a quarter of younger workers — 28 percent — have at least 10 percent deducted from their paychecks, according to the study. It analyzed the behavior of 4 million employees in the plans the company administers, from 2011 to 2016. Among the older generations, 35 percent of Gen X-ers and 44 percent of boomers were at the 10 percent contribution mark.

Boomers get their own shout-out. If you assume they are the ones earning $100,000 or more, which they likely are, they are the "most improved" group over the study's five years among those who contribute at least 10 percent. There was a 15.3 percent increase among those making $100,000 or more hitting the 10 percent rate.

At the same time, there is a lost opportunity for boomers. Just 7.7 percent of participants 50 and older make the additional $6,000 "catch-up contributions" allowed by the IRS.

Efforts to get employees to start saving earlier and a widespread trend to auto-enroll employees in retirement plans have helped put more people of all ages in the most popular default investments, target-date funds.

These funds are widely diversified and automatically adjust asset allocations between stocks, bonds, and other assets based on a person's age, leading up to a more conservative portfolio at retirement.

The survey found that 85 percent of millennials use a managed investment such as a target-date fund, compared with 77 percent of Gen X-ers and 73 percent of boomers.

"We're seeing the first generation that had the full, out-of-the-gate use of tools like auto-enrollment and target-date funds, and it's really getting people into plans early and getting them diversified," said Joseph Ready, head of Wells Fargo Institutional Retirement & Trust. "Whether they're astute about the market or not, these things will help people take advantage of, hopefully, longer-term returns from the equity market over the next 35 to 40 years."

When younger savers do fiddle with their 401(k) accounts, some of them are making smart tax moves. Sixteen percent of millennials elected to use a Roth 401(k), compared with 12 percent across all generations.

Contributions that go into a Roth are after-tax, so starting one when you're young and in a low tax bracket is a good strategy.

For all that, there's room for improvement among millennials. If 28 percent are deferring at least 10 percent of their pay, seven out of 10 aren't.

Employers can help by automatically escalating employee contributions each year and doing so at a higher rate. Employers have been concerned about being too aggressive with this strategy, and those that do it typically increase the contribution rate by 1 percent annually.

Wells Fargo's Ready urges employers that use auto escalation to bump employees up by 2 percent a year to get them up to that 10 percent savings goal faster. Wells Fargo data show that if employers bump the auto-increase rate from 1 percent to 2 percent, there's no big difference in the rate of employees who opt out of the increase.

And it makes a huge difference in how prepared they are to retire, Ready said. Employees can take matters into their own hands, of course. Every time a raise or a promotion comes along, make it a point to increase your savings rate, whether through your 401(k) or in a separate savings account. That use of today's rewards will yield a far more meaningful return tomorrow.

Instant Insights /

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