It's no secret that baby boomers are facing a retirement crisis. Yet despite the hardships faced by their parents and grandparents — including delayed retirement, investment losses, and quality of life adjustments — the majority of Generation Y members have not begun to think about retirement.
According to a new survey by online investing firm Scottrade, the majority of Gen Y (55 percent) have not started to save for retirement, and fewer than a quarter (21 percent) are actively planning for retirement. Additionally, 60 percent of Gen Y saved nothing toward retirement in the last year, and 40 percent plan to save nothing in 2011. Twenty-one percent plan to save just one or two percent of their income this year.
Generation Y is defined as those born between 1983 and 1991 (currently aged 20-28). These individuals are often young professionals who are at the beginning of their careers; the perfect time to start saving for retirement. Yet 73 percent of these generation currently has less than $25,000 saved for retirement.
“What Gen Y may not realize is that older generations based their retirement planning on the three-legged stool of Social Security, savings, and employer pensions,” said Craig Hogan, director of customer intelligence at Scottrade in a statement. “The approach their parents and grandparents took toward saving is no longer appropriate because the old model doesn’t exist. By the time Gen Y retires, they may have only one reliable leg to stand on – their own savings – and they need to plan accordingly.”
Gen Yers gave 29.2 as the mean ideal age to start saving for retirement. But if younger members of Gen Y start saving immediately, they can nearly double their savings in retirement, increasing their chances of having guaranteed income. In fact, 50 percent of baby boomers, who have been hit hard by the financial crisis, recommend starting to save earlier than age 25.
Nearly half (46 percent) of boomers didn’t start saving for retirement until age 35 or older. But, if given a second chance, 58 percent of boomers would have start saving at a younger age and 45 percent would have saved more.
These statistics provide a valuable lesson in retirement savigns for Gen Y; 20-somethings need look no further than boomers’ current retirement picture to see the effects of delaying saving for retirement. Almost half (47 percent) of boomers have $100,000 or less saved, and more than a third (37 percent) are concerned that they will have to work in their retirement years. Twenty-three percent of boomers think they’ll still be working at age 75 or older.
“Considering the boomers’ plight and how easy it is to invest on your own in a very low-cost way, we would have expected to see Gen Y reacting by increasing its savings,” Hogan said. But the data show that's not the case.
Fortunately for Gen Y, there is still plenty of time to turn their retirement plans around — and they know they need to. Almost three-fourths of Gen Yers (73 percent) realize that they are not saving enough for retirement, and previous Scottrade survey data revealed that Gen Y finds investing fun and interesting.
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