By Michael P. Regan
The Associated Press

Tracy Yen's opinion of 401(k) plans soured when she was laid off from her first job and learned she hadn't been with the company long enough to keep the matching funds her employer had contributed to the plan.

"All that time I was thinking I had this much money, when all that time I didn't," she recalled. "I didn't understand what vesting was until that point."

The experience led the 28-year-old Oakland, Calif., woman to decide not to participate in the 401(k) plan at her next job.

That put her in the middle of a large group of young workers ignoring the chorus of financial planners who tout the employer-sponsored retirement plans as their best chance of enjoying a comfortable retirement.

To start with, only 41 percent of workers age 21 to 24 and 54 percent age 25 to 34 work for employers who sponsor retirement plans, according to the Employee Benefit Research Institute.

And of those eligible for 401(k) plans, some recent studies show that less than half of workers in their 20s participate.

Financial service firms have tried diligently to reach the younger generation and explain that choosing not to participate can mean turning down thousands of dollars in matching funds from their companies - money that could grow exponentially by the time they retire.

Young workers give a variety of reasons for not participating.

A recent survey by Cigna Retirement & Investment Services found almost half of respondents 25 and younger said their opinion regarding savings had been influenced by global political instability and corporate corruption. Only about a quarter of baby boomers had the same response.

Some in the industry are skeptical that even this amount of hands-on education is enough.

"The 401(k) is an experiment, and its successful outcome is in doubt," said Wayne Gates, general director of market research and development at John Hancock Financial Services, Inc. "Education isn't working. We need to change the way the plan is designed and operates."

Gates and many others in the industry are advocating that companies choose plans which automatically enroll workers once they are eligible, then increase their contributions when the workers get raises and rebalance their plans as they get older.

So far, only about 14 percent of companies who offer 401(k) plans automatically enroll workers when they become eligible, according to research from Hewitt Associates, Inc., a Lincolnshire, Ill., outsourcing firm that administers 401(k) plans for large companies.

Stephen Utkus, a principal at the Vanguard Center for Retirement Research, advocates an "autopilot" 401(k) plan, automatically enrolling employees at a 2 percent or 3 percent contribution when they are eligible, often after one year or some other milestone of service. Then the plan should automatically increase the rate contributed each year until the employee reaches a maximum level.