I was going through the Scottrade 6th Annual retirement survey for 2012. Compared to 2011 the trend seemed favorable to what we, the personal finance bloggers, want to see. Americans all across the board started saving more, spending less and the participation in tax deferred accounts increased. Boomers, Gen X are planning actively for their future
Scene is still not bright for Gen Yers, on the other hand still have a lot to catch up. Today’s young adults fall in this category, age 18 -28, to be precise. As per the survey, only 63% of working class gen Y hold tax deferred retirement account (employer’s 401(k) or IRAs). Still there’s a ray of hope:
“The number of Gen Yers planning to seek out information on retirement planning in the next 12 months doubled to 40 percent from 20 percent in 2011“. Says the report.
Looking far ahead is something young people need to do more often, especially when it comes to financial planning and money management. Time is a young adult’s most valuable asset because it allows him to prepare for his retirement. Don’t you want to live comfortably for the rest of your life?
Younger people don’t save a lot
The problem is not everyone, young adults especially, have retirement savings. They either don’t have the ability to save, or just don’t think about it. As per 2011 retirement survey, about 55% of Gen Yers haven’t started putting money for their retirement and that 64% don’t even worry about retirement.
The survey also showed how older people think about saving later in life. Half of the respondents said they should have saved money when they were 25 or younger.
(Related – Can you afford early retirement?)
Reasons younger people can’t build a nest egg
But young people aren’t entirely to blame for the lack of retirement savings. Matt Wallaert, lead scientist for a site focused on helping people get a raise, identified the reason why most Gen Yers haven’t built a nest egg: high-income job and freedom from debt.
He concludes that younger people don’t have access to both. He even points the finger at the economy, and it’s not surprising to see why. Employees in their 20s are the ones mostly laid off. Furthermore, a lot of those who have jobs are employed as a freelancer or contractor status, which means no benefits and job security.
With student loans and other debt, like credit card debt, they need to settle, these people won’t be thinking of putting money into their 401(k).
But there are those who simply don’t like to put money into retirement. And while a huge number (38%) say they’re worried about not having enough money in the future and having to work in retirement, the reality for a lot of these people is they still won’t be able to save even if they want to.
Not intimidated by investment
High living expenses, lack of high-paying jobs, lack of job security and benefits, and debt are obstacles young adults need to overcome. But the potential is great for these people especially now that this generation is not intimidated by investment. Because information is readily accessible and available, Gen Yers believe investing is “fun and enjoyable.”
Smart ways to save for the future
To retire rich, you have to be smart about your money. Here some tips:
Have a 401(k) plan. The earlier you start, the more money you’ll have when you retire. This, eventually, will be free money for you and the more contributions you make, the more cash you’ll end up with. You also have the choice in the amount of contributions. There are many benefits of having a 401(k), so better start early.
If you’re switching jobs, then you’re most probably going to wonder “How do I rollover my 401(k)?” Don’t act in haste because you may end up losing money (and years). It’s best to research and consult with the right people and resources.
Don’t be too quick in paying off your student loans. In this case, it’s all right to wait for the right time. Because interest rates are fixed and lower for loans issued after 2006, you’ll get more value for your money by taking your time.
(Related – How much do you need for retirement?)
Have an emergency fund, it’s most advised personal finance advice! Pay yourself first. Cut back on spending. You have a lot of time so use it to your advantage. Make the right financial choices and you can retire rich.
I came to America in 2005 and started my first retirement account in 2009, at an age of 30+. Still, I am confidant to have saved enough for retirement by the time I turn 55.
So, even if you have not saved enough for your retirement yet, it’s never too late. You are not alone, 61% of Americans surveyed feel that they haven’t saved /or are not saving enough for retirement. Take action today and start investing. You may want to go through my previously posted list of 20 best practices for retirement saving.
Are you saving for retirement and are you satisfied with the rate you are going now?