Younger workers are saving for retirement but fear that they aren't saving enough and that benefits such as
Social Security will be cut before they are ready to retire, according to a new study.
In the study, 67% of respondents said that they had less than $20,000 in retirement savings.
Overall, half the respondents reported saving on a regular basis but felt that they could do better.
The study, "Preparing for Their Future: A Look at the Financial State of Gen X and Gen Y," was sponsored by the American Savings Education Council, a program of the Washington-based Employee Benefit Research Institute and Divided We Fail, a coalition linked to Washington-based AARP.
The online study surveyed 1,752 individuals 19 to 39 between Jan. 9 and 24. It identified Generation X as those born between 1968 and 1979, while it said that Generation Y includes those born between 1980 and 1988.
Even though many younger workers have begun saving for retirement at an earlier age than previous generations, they are still unlikely to save enough because of new burdens to come, said Greg Salsbury, executive vice president at Jackson National Life Distributors LLC of Denver. Among these, he included likely cuts in Social Security and Medicare.
"The part that's new for them is how responsible they'll need to be for everything in retirement," Mr. Salsbury said.
"The ramifications are more severe for those two generations," he said. "If you look at when Americans historically begin saving for retirement, they are in their 40s."
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The study showed that just 22% said they were very or somewhat confident that upon retiring, they would receive Social Security benefits comparable to those paid today. Similarly, just 28% were confident that Medicare would deliver comparable benefits.
Generation Y tends to be more optimistic than Generation X about undiminished Medicare and Social Security benefits.
Part of the reason younger workers are more stressed about retirement saving is the expectation of more responsibilities, Mr. Salsbury said. "If I were a Generation X or Generation Y, I'd be really pissed off," he said.
"They're the ones whose futures have been mortgaged off," Mr. Salsbury said. "The 800-pound gorilla that no one wants to recognize is Medicare."
Mr. Salsbury pointed out that many Americans will receive more in Social Security benefits then they actually put into the system.
"But that's not the case with Generation X or Generation Y. They'll need to save more money than other generations have needed," Mr. Salsbury said.
The study showed that younger workers feel that they aren't saving as much as they should, but also said purchasing a home and supporting a family, among other expenses, are more difficult now than for previous generations.
Many of the younger clients are still dealing with debt issues, according to Richard Feight, an 11-year financial services veteran who in January opened his own firm, IAM Financial LLC in Grand Rapids, Mich. The firm manages about $3 million in assets.
More than eight in 10 respondents reported having non-mortgage debt, and 63% said they had credit card debt.
"They've got a big house, and some of them have debt," Mr. Feight said. He added that if younger clients have started saving at least 15% now, they should be fine.
However, Mr. Feight said, if they want a large retirement income, they need to save much more than 15%.
"I've spoken to unrealistic people, too, who say they'd like $150,000 annually in retirement income and retire at age 55, and they're only saving $5,000 a year."
Overall, younger people feel positive about future financial security. According to the study, 91% of those surveyed said they had financial goals.
E-mail Lisa Shidler at [email protected].
