For mil­len­ni­als, nest eggs frag­ile

Nearly half of young adults said to lack re­tire­ment sav­ings, pen­sions

Baltimore Sun - - BUSINESS - By Stan Choe

NEW YORK — Young Amer­i­cans with even just $1 saved for re­tire­ment are ahead of the pack.

Forty-eight per­cent of all Amer­i­cans aged 18 to 30 have zero in re­tire­ment sav­ings and no ac­cess to a tra­di­tional pen­sion, ac­cord­ing to a GenFor­ward poll by the Black Youth Project at the Univer­sity of Chicago with The As­so­ci­ated Press-NORC Cen­ter for Pub­lic Af­fairs Re­search.

The youngest in that group are more likely to still be in school, but the trend also holds for those in their late 20s. More than 4 in 10 of those aged 25 to 30 have noth­ing for re­tire­ment.

These same Amer­i­cans are part of a gen­er­a­tion whose fu­ture re­tire­ments, if they hap­pen at all, will be more de­pen­dent on their per­sonal sav­ings. That’s be­cause tra­di­tional pen­sions are be­com­ing more and more rare. Only 7 per­cent of those sur­veyed say they’re in line to get the cov­eted ben­e­fit, which prom­ises to pay a set amount monthly af­ter re­tire­ment.

Plus, young Amer­i­cans are likely to get less in So­cial Se­cu­rity ben­e­fits than their par­ents or grand­par­ents. The age to re­ceive full So­cial Se­cu­rity ben­e­fits is climb­ing, up to 67 from 66. And most young Amer­i­cans don’t have much faith in the So­cial Se­cu­rity sys­tem to be­gin with. Only 5 per­cent say they’re very con­fi­dent in it, and 28 per­cent say they’re some­what con­fi­dent.

De­spite all that, a ma­jor­ity of young Amer­i­cans still say they are con­fi­dent that they’ll have enough to re­tire when they want to. “I feel pretty good about our fu­ture,” says Shavonne Henry, 26, of Van­cou­ver, Wash., who, with hus­band Michael, 25, has some 401(k) sav­ings. African-Amer­i­cans, AsianAmer­i­cans and white Amer­i­cans have sim­i­lar lev­els of con­fi­dence, be­tween 53 per­cent and 56 per­cent. Lati­nos are an ex­cep­tion. Only 43 per­cent say they’re very or some­what con­fi­dent.

“I feel pretty good about our fu­ture,” says Shavonne Henry, a 26-year-old who lives in Van­cou­ver, Wash., with her 25-year-old hus­band and chil­dren. They have some saved up in a 401(k) through her hus­band’s job and a rolled-over 401(k) ac­count from her old job.

“The rea­son we got to sav­ing at all was I took a fi­nance class in col­lege, and part of the course was: If you want to have the kind of re­tire­ment you want to have, you should start sav- ing at 20,” she says. “I don’t think that’s talked about enough.”

More em­ploy­ers are look­ing to give their work­ers, young and old, a nudge to start sav­ing for re­tire­ment by au­to­mat­i­cally en­rolling them in 401( k) plans. At plans ad­min­is­tered by Van­guard, 41 per­cent of em­ploy­ers did so last year, up from 27 per­cent five years ear­lier.

But to get that ben­e­fit, a worker needs a job that of­fers a 401(k) in the first place, and some younger Amer­i­cans say it’s dif­fi­cult find­ing such a ben­e­fit.

Al­li­son Ri­ley, a 25-yearold in Mon­roeville, Ala., has built up her sav­ings ac­count at the bank by work­ing nights as a wait­ress. But when she asked if the job came with a 401(k) ben­e­fit, “they said ‘401 what?’ ” she says. “I took that as a no.”

She’s us­ing her sav­ings now to help pay for classes she’s tak­ing, and she hopes to be­come a high school teacher. She also says she’s con­fi­dent about the fu­ture. “Once I get to a bet­ter job, I know how I like to squir­rel away money,” she says. “I think I’ll be OK.”

There is no magic an­swer for how much a per­son needs to have saved for re­tire­ment. Two peo­ple with iden­ti­cal ages and in­comes could need very different amounts, de­pend­ing on how long they ex­pect to work, how much they want to spend in re­tire­ment and other vari­ables. Fidelity sug­gests sav­ing 15 per­cent of your in­come each year. Fi­nan­cial ad­vis­ers sug­gest sav­ing enough so that your nest egg at re­tire­ment is 25 times the an­nual ex­penses you’ll need to cover.

The GenFor­ward poll did not ask how much young Amer­i­cans had saved for re­tire­ment, only whether they had done so.

Aisha Ah­mouda, a 30year-old reg­is­tered nurse, is op­ti­mistic about her fu­ture de­spite hav­ing lit­tle in re­tire­ment sav­ings and less faith in the fu­ture of So­cial Se­cu­rity.

She’s pur­su­ing a master’s de­gree to be­come a nurse prac­ti­tioner, a job that comes with loan-as­sis­tance pro­grams if she goes on to work in a med­i­cally un­der­served area. She also hopes that it puts her on a ca­reer track that will al­low her to con­tinue work­ing into her late 60s or early 70s, even if her mo­bil­ity starts to wane, giv­ing her time to build up sav­ings.

“Not ev­ery­thing is cer­tain, even when you’re putting away sav­ings,” she says. “I’m go­ing to do the best I can and leave the rest up to a higher power.”

The poll of 1,851 adults aged 18 to 30 was con­ducted Sept. 1 to 14 us­ing a sam­ple drawn from the prob­a­bil­ity-based GenFor­ward panel, which is de­signed to be rep­re­sen­ta­tive of the U.S. young adult pop­u­la­tion. The mar­gin of sam­pling er­ror is plus or mi­nus 3.8 per­cent­age points. The sur­vey was paid for by the Black Youth Project at the Univer­sity of Chicago, us­ing grants from the John D. and Cather­ine T. MacArthur Foun­da­tion and the Ford Foun­da­tion.


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