Many companies still offer pensions — and with them, retirement income that you can't outlive. Generation Xers and Millennials with in-demand skills can target jobs with pension plans — but what's the fallback?
Too many don't know. If we filled a room with all of Generation X and Y, and then separated the room in half, less than half of the people on one side of the room would have made saving for their retirement a top priority, according to research from LIMRA, a research, consulting and professional development organization for insurance and financial services companies.
The study's findings reveal that "There are nearly 116 million Americans aged 20 to 47, and most of them will have to rely solely on their savings to fund their retirement," said Alison Salka, corporate VP and director of LIMRA Retirement Research. "Yet our research indicates that few of these consumers are taking full advantage of the retirement savings vehicles available to them. Fewer than half of Gen X and only a third of Gen Y believe saving for retirement is a top priority. If younger Americans start saving just a few years earlier, it can have a significant impact on their retirement security."
LIMRAs five suggestions to improve your chances of building a secure retirement:
- Improve financial knowledge — 60 percent of Gen X and 54 percent of Gen Y have little to no knowledge about financial products and services. Once they learn about available options, they can make better decisions about investments and savings habits.
- Get Help — People who work with an advisor are more likely to contribute to a retirement plan (78 percent vs. 43 percent); they are more likely to save at a higher rate (61 percent vs. 38 percent) and feel more confident about their retirement prospects (71 percent vs. 43 percent).
- Participate in employer-sponsored retirement savings plan or start an IRA — Enroll in a retirement plan or establish an IRA to take advantage of tax-deferred savings and matching contributions. LIMRA found 56 percent of Americans ages 18 to 34 are not currently contributing to a retirement plan. Not taking part is leaving free money on the table.
- Steadily increase contributions — Take advantage of the automatic contribution escalation and automatic asset rebalancing. If your plan doesn't offer these features, increase your contribution rate 1-2 percent annually and review your investment portfolio every year.
- Don't withdraw your retirement savings — Cash-outs and withdrawals undermine consumers' ability to reach their retirement savings goals. Avoid this pitfall by ensuring the money remains set aside for retirement.
The study is based on a LIMRA survey conducted in May 2012.