CBO: Young Workers With Incomes Over $20,000 Do Save For Retirement

Young workers with incomes over $40,000 were much more likely to contribute to retirement plans than workers over age 60 were, and the young workers were only slightly less likely to contribute than workers between the ages of 30 and 60.

Although high-income and middle-income young workers were about as likely to contribute to plans as older workers were, average contribution sizes were lower for young workers.

Young workers with average incomes over $160,000 contributed an average of $5,836 to 401(k) plans, for example, compared with an average of $7,015 for all workers.

But young workers with incomes between $40,000 and $80,000 put in an average of only $1,863, compared with an average of $2,621 for workers of all ages.

Burnham notes that looking only at contributions to tax-deferred plans understates total retirement savings.

“Owner-occupied homes, to which a variety of tax incentives apply, provide a major source of funds for many people, who can use their home equity for retirement needs either by moving into less expensive housing or by drawing on reverse mortgages,” Burnham writes.

The CBO has posted a copy of Burnham’s at http://www.cbo.gov/showdoc.cfm?index=4490&sequence=0&from=7