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Will Gen Y Be Ready for Retirement?

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Retirement SavingsOne of the questions facing the members of Gen Y is this: Will I be ready for retirement?

There are a number of challenges facing Gen Y (roughly defined as those between 18 and 34 right now), and many of these challenges are making it difficult for members of Gen Y to plan for retirement. Many of them are struggling just to get by as it is, much less prepare for a retirement that seems a long way off.

Average Savings for Members of Gen Y

According to the Employee Benefit Research Institute (EBRI), those aged 25-34 are the least likely, among age groups surveyed, to have saved for retirement. While 55% report that they save for retirement, that doesn’t mean that they are saving enough. Indeed, the EBRI survey found that only 24% of those aged 25-34 have at least $25,000 in their retirement accounts right now. Even contributing $1,000 a month for the next 35 years, it will be difficult for members of Gen Y to hit $1 million. The stock market will have to do very well indeed.

Gen Y and the Challenges Members Face

Saving for retirement as a member of Gen Y has its own issues. One of the biggest issues is employment. The Bureau of Labor Statistics reports that the unemployment rate among members of Gen Y is between 1/2 and 1 percentage point above the national average. According to information from the U.S. Census, those aged 25 to 34 have seen an 8% drop in income since the end of 2007. The very fact that members of Gen Y are struggling with employment and income presents a challenge to the ability to set aside money for retirement.

Another issue is Social Security. Baby Boomers have the advantage of Social Security, retirement savings, and — in many cases — pensions. Members of Gen X rely more on 401(k)s than on pensions, but the Social Security is still a possibility. However, the Congressional Budget Office recently estimated that trust fund assets will begin dropping in 2023, and be exhausted in 2036. So, not only is it difficult for members of Gen Y to set aside money for retirement, but they are also likely to have less help during retirement than many of their predecessors.

What Can Members of Gen Y Do to Improve Their Chances?

Members of Gen Y need to take steps to improve their chances for a reasonable retirement. Technically, I’m a member of Gen Y (although I identify more with Gen X), and I’ve seen some of the challenges. However, I’ve been able to get around some of them with the help of owning my own business, and investing using a Roth IRA.

Members of Gen Y need to look for ways to boost their retirement savings. One of the most effective ways to do this is to start a business. Recent difficulties in the job market indicate that members of Gen Y can’t rely on employers to provide them with what they need to succeed with retirement. There are a number of different options for self-employed retirement plans, and members of Gen Y might need them if they plan to catch up with their future.

What do you think are the challenges facing Gen Y with regard to retirement? What do you think members of Gen Y should do to address the problem?

(Photo: Tax Credits)

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9 Responses to “Will Gen Y Be Ready for Retirement?”

  1. William @ Bite the Bullet says:

    Gen Y has one advantage over the rest of us: they grew up with what we call new technology. For them, it’s all they know.

    The new economy will be driven by that new technology. New careers (social media, blog writer — hello, Miranda! LOL) these things come naturally to people who grew up with it.

    Traditional employment, with retirement, is dying. That’s the bad news. The good news is they have tons of online resources not available to previous generations, both to generate income and to learn how to manage it.

    Of course, there will be the bell curve: some will do it well, most so-so, and some will blow it off and suffer. But that’s not any different from our generation, is it?

  2. I think, as Gen Y, we have so many perceived necessary costs such as cell phones that we really don’t need or our parents didn’t have to pay for.

    I think I’ll be ready, but time will tell!

    • Emily says:

      Agreed. I wonder how many of them aren’t putting anything into savings but are paying $100+/month for expensive cell phone plans.

  3. admiral58 says:

    Take advantage of the Roth accounts for as long as possible. Pay taxes now while you’re still working and can live with it.

  4. Jennifer says:

    I’m always surprised at how many people my age don’t save enough or simply don’t save at all. However, I don’t think this is something that is only an issue for people who fall into the Gen Y category. I know I tell as many of my co-workers as possible to make sure they are taking advantage of the 401K match and all of the resources available to them. Sometimes all it takes is getting someone to take the time to set up the initial account. I’ve managed to get a few friends to set up accounts and automatically increase their saving percent each year to correspond with their pay increases.

  5. Ray says:

    I think the issue is just getting started. Once you understand that you can’t work forever, and the government has programs to help you retire (IRAS/401k) then, the only hurdle left is setting the accounts up.

    It is vital that people do this as early as possible, not only to let compound interest start working, but to lock in any benefits that may be later removed.

    As an example, NYC Teachers Union used to offer a nice pension. Last year a controversial new pension was created named Tier 6 was passed. The new pension has a drastic decrease in benefits, increased contributions from teachers, and a much longer vesting period.

    It was all around bad for the teachers, but the new pension effected new enrollments only. This was a relief to many teachers, but at the same time if you never enrolled, even if you worked for the city for many years, then you would be put in the new system.

  6. Shafi says:

    When I was at the age you described as Gen Y, we didn’t have enough information. There was no Internet as we know it now. But still we were saving for retirement. Getting information is one thing, acting on that information for the benefit of our own financial life in our later years is entirely different. Gen Y must act now to save for retirement.

  7. Mike says:

    I can’t afford to retire. Dying would be much cheaper. :-)

  8. Shirley says:

    Many of the Y generation have grown up with the instant gratification attitude, mostly because their parents/grandparents wanted better for them than they had themselves. With new tech items constantly changing and viral marketing blatantly targeting them, they have little left over for something like retirement which they perceive as “something to be thought about later”.
    With age and experience comes a realization that later is closer than you think.


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