New Research on Retirement Saving

 When it comes to saving for retirement, Generation Y is not taking a cue from their Boomer parents, many of whom are facing financial challenges as retirement looms. The majority (55 percent) of Gen Yers have not started to save for retirement, and fewer than a quarter (21 percent) are actively planning for retirement.

A new survey, commissioned by online investing firm Scottrade, shows that 60 percent of Gen Yers (born 1983-1991) saved nothing toward retirement last year and 40 percent plan to save nothing in 2011. An additional 21 percent plan to save only one to two percent of their income this year.

“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. “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.”

When asked what age they’d recommend people start saving for retirement, Gen Yers recommended a mean age of 29.2 years old, giving even the oldest of the group two more years before this generation thinks they need to start saving.

Boomers’ Regrets
As the first class of Baby Boomers (born 1945-1966) turns 65 and evaluates whether they can retire, many have regrets that can provide an important lesson for Gen Y. Nearly half (46 percent) of Boomers didn’t start saving for retirement until age 35 or older. However, if given a second chance:

The majority of Boomers (58 percent) would have started saving at a younger ageNearly half (45 percent) would have saved moreFifty percent would recommend starting to save earlier than age 25

Learning from the Past
Gen Y 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. Almost a quarter (23 percent) 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 our data shows that the vast majority – 73 percent – currently has less than $25,000 saved for retirement. And that number has been about the same for the past three years.”

Youth, Enthusiasm on Their Side
“There is no shortage of lessons to be learned from the Boomers’ retirement planning experiences,” Hogan said. “The good news for Gen Y is that they have the advantage of Boomers’ hindsight, youth and enthusiasm. If Gen Yers focus their interest in investing toward their retirement portfolios, there is still plenty of time for them to get where they need to go.”

Gen Y’s lack of action doesn’t stem from lack of awareness or interest. 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. In addition, they are the most likely to manage their own investments.

“We strive to make planning and saving for retirement easy and accessible for every generation, including tech-savvy Gen Yers,” said Scottrade’s Chief Marketing Officer Kim Wells. “Our social media support, mobile, online community and Knowledge Center with online education and research tools, such as IRA and retirement calculators, give investors the resources and convenience they need to be confident in planning their own financial futures.”