Young adults worry about retirement, Pew finds - Business, Government Legal News from throughout WV

Young adults worry about retirement, Pew finds

Posted: Updated:

Although the economy is recovering, nearly 40 percent of adults said they are more worried now about their retirement savings than they were in 2009.

According to Pew Research Center, 38 percent of adults reported they are "not too" or "not at all" confident they will have enough income or assets saved for retirement, up from 25 percent in a February and March 2009 Pew study. Pew also found concerns about retirement savings are more heavily concentrated among younger and middle-aged adults than those closer to retirement age. Today, retirement worries peak among adults in their late 30s, many of whom are the sons and daughters of baby boomers.

So why is that age group more likely to worry? Will Carter, director of wealth management at McKinley Carter Wealth Services, said it's because they see the examples, both good and bad, older generations have set.

"For people in their 30s now to start thinking very pragmatically and with some degree of concern about their retirement, they're doing that 10, 15, sometimes even 20 years earlier than the generations that preceded them," Carter said. "So the effects of saving and compounding growth over time are really remarkable."

Carter used the hypothetical example of twins Joe and Jim. Joe starts saving for retirement at age 21 and saves $10,000 a year until he stops saving at age 30. Jim starts saving at age 30 and saves $10,000 yearly until retirement at age 60. Although Jim saves longer, Joe has more money for retirement, Carter said, because of growth.

"That's how powerful starting early is," Carter said.

Although conventional advice says to start saving for retirement as soon as possible, Carter said those starting later in life do have time so save substantially.

"There are all sorts of tools and to help figure out how much you need to be saving to maintain a certain standard of living," Carter said. "Those are available online. Or you can take it as a rule of thumb; you should be saving 20 percent of what you take home. If you're taking home $1,000 a month, you should be saving $200 a month so you have a real high probability of maintaining that $1,000-a-month lifestyle in retirement. And that's if you're starting in your 30s. If you're starting in your 40s or 50s, that number needs to be even higher for every $1,000 you're taking home."

And it's those older workers — those who were born at the tail end of the baby boom generation — who Carter said may have reason to worry. He said those born in the post-World War II generation saw an increase in income and lifestyle and they didn't think about how they would sustain themselves in retirement.

"They came of age in a period after World War II where there was no competition abroad," Carter said of baby boomers. "Europe was in shambles after World War II. The rest of the world was either in communist, totalitarian states or undeveloped, so we had no competition. Our lifestyles doubled and our incomes doubled over the next generation. That stopped in the mid-'70s, but we kept spending like it was continuing to grow with, first of all not saving as much and then borrowing money. So the baby boomer generation came of age and became adults in a period where there was a lot of money in the system and we never had to think hard about it because we weren't doing the math about what we were going to live on later in life."

Younger generations have seen how older adults look at retirement and are doing more to make sure they don't find themselves in similar situations. Carter said younger workers are aware that no one will take care of them in retirement except themselves.

The solvency of Social Security has been called into question over the past few years as more and more baby boomer and older generations retire and take advantage of the program. Meanwhile, there are fewer younger workers available to fill their positions in the work force and pump money into Social Security. Although the program exists to help older people post-retirement, Carter advises all workers to be aware of their standard of living and question how they will continue that when they stop working.

"I actually hear people of all ages expressing questions about whether Social Security will be available for them or not," he said. "I think it's prudent for everybody to be aware how much of their standard of living they'll be able to replace without Social Security. I think it is unnecessarily difficult or hard for anyone to say there will be no Social Security. The question is how much."

Concerns about retirement finances increased in every age group between Pew's 2009 and 2012 surveys. Older and younger adults expressed the most confidence they will have enough resources in retirement while middle-aged adults expressed the least confidence. One reason for that could be because the Great Recession was particularly harmful to adults approaching or already in early middle-age, Pew found.

According to Pew, overall median wealth declined by 39 percent between 2007 and 2010. Adults ages 35-44 experienced the largest proportional decline, losing 55 percent of their net worth during this period. The losses were smaller among older adults.

Powered by WorldNow
All content © Copyright 2000 - 2014 WorldNow and WVSTATE. All Rights Reserved.
For more information on this site, please read our Privacy Policy and Terms of Service.