EL SEGUNDO, CA, December 2, 2012: A 2012 survey conducted by Scottrade found that only 63 percent of Gen Yers are currently taking advantage of a tax-deferred account — the smallest percentage of any generation. This unnerving fact led Go Banking Rates managing editor, Casey Bond, to consider the reasons behind this seemingly indifferent attitude toward saving for retirement and provide suggestions on how members of Gen Y can begin a savings plan in her most recent op-ed piece.
"Maybe it’s because our generation’s role models make blowing cash left and right so glamorous," explains Ms. Bond. "I remember when Lil Wayne made headlines over Memorial Day weekend when he and Drake dropped a stack of singles worth $250,000 on 'entertainment.' … it’s no way to build a retirement fund."
She points out that Christine Fahlund, vice president of T. Rowe Price investment services, recently told Reuters that Generation Y needs to save 15 to 20 percent of their annual incomes — starting at age 25 — in order to maintain their same standard of living in retirement.
However, Ms. Bond explains that this goal is easier to reach than some young adults may realize, as the economy is still doing poorly, which means investments are cheap, often undervalued and easier to buy into. Additionally, while workers in their 40s, 50s and even 60s are desperately trying to recoup the retirement savings they lost during the financial crisis, Gen Y has the next several decades to ride out market ups and downs.
How to Get Started
Because most young employees understand the importance of saving for retirement, but not how to implement a savings plan, Bond provides three tips for getting started:
- Start small: A lot of numbers get thrown around regarding how much young workers should be putting aside for retirement. Bond advises that those who are intimidated by these guidelines ignore them and simply contribute what feels reasonably, as there will always be the opportunity to increase contributions in the future.
- Take advantage of employer matches: Most organizations don’t force employees to go at saving for retirement alone. Workers should ensure they're receiving an employer match — usually a percentage of salary or a percentage of contributions— so they can take advantage of free money and grow savings that much faster.
- Automate: Bond explains that having retirement contributions automatically withdrawn from pay and deposited in a 401(k), IRA or other tax-deferred account will remove the worry over seeing money that can't be spend and make saving psychologically easier.
About Go Banking Rates
Go Banking Rates (GoBankingRates.com) is a national website dedicated to connecting readers with the best interest rates on financial services nationwide, as well as informative personal finance content, news and tools. Go Banking Rates collects interest rate information from more than 4,000 U.S. banks and credit unions, making it the only online rates aggregator with the ability to provide the most comprehensive and authentic local interest rate information.
Additionally, Go Banking Rates partners with a number of major media outlets such as Business Insider and US News & World Report to provide compelling and edifying personal finance content, and its expert editors have been featured and quoted on several premier finance websites like Yahoo! Finance, LearnVest, The Motley Fool, Money Talks News, Forbes, The Street, Huffington Post and more.
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