Gen X and Y Investors Worry Retirement Savings Won't Be Enough

T. Rowe Price finds surprising confidence in Social Security system

Only a little more than one-third of investors between the ages of 21 and 50 are confident they will have enough money for retirement, according to a study released Thursday by T. Rowe Price.

Even though they understand the importance of retirement planning, two-thirds of these investors have not developed a detailed plan for their finances in retirement.

“This research underscores the fact that many more young investors need to get started planning for their retirement, even though the date may be decades away,” Christine Fahlund, senior financial planner with T. Rowe Price, said in a statement.

 “The study also demonstrates the important financial and psychological benefits of having a detailed savings and investment plan,” Fahlund said. Younger investors who have a detailed plan reported feeling much more confident about their retirement readiness, with 58% believing they will have enough money for retirement.

Harris Interactive conducted the online study on behalf of T. Rowe Price in December among 860 adults, comprising Generation X (ages 35 to 50) and Generation Y (ages 21 to 34), who had at least one investment account.

A detailed retirement plan might include the following components, the study found:

  • 77% of those with a plan said it targets an anticipated monthly budget;
  • 84% cited having a specific monthly withdrawal strategy;
  • 78% said their plan considers life expectancy and how long their savings might need to last.

Generation X and Generation Y investors said they expected to receive retirement income from multiple sources, most commonly:

  • 401(k)s or other workplace retirement plans, 74%;
  • IRAs, 65%;
  • Non-retirement accounts (e.g., checking, savings, stocks, bonds, mutual funds), 64%;
  • Social Security, 63%.

“Younger investors’ confidence in the Social Security system was surprisingly positive,” Fahlund said. “Still, it shouldn’t be relied upon too heavily. Investors need to consider it as only one source of retirement income and make sure they are contributing to their retirement through other accounts.”

Study participants said they expected to retire at the mean age of 62, and anticipated living 22 years in retirement. Fahlund said the latter number was a significant underestimate.

“Many people will live well beyond 22 years in retirement,” she said. “To be adequately prepared financially and to ensure they don’t outlive their money, we suggest that investors annually save at least 15% of their salary, including any available employer match, and consider a possible retirement of 30 or more years, to age 95.”  

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