Significant majorities of young people, but only a minority of their boomer parents, contribute regularly to individual retirement accounts, according to new research.
TD Ameritrade Holding Corp., Omaha, Neb., published this finding in a summary of results from an online survey in April of 2,001 U.S residents. The poll was conducted on behalf of TD Ameritrade by Head Research, Toronto, Canada.
The report reveals that 59% of Generation X (born 1965 to 1976) and 56% of Generation Y (born 1977 to 1989) make regular, automatic contributions toward their retirement savings. This compares to 46% of non-retired baby Boomers (born 1946-1964).
The report also shows that both Gen X and Gen Y started saving for retirement, on average, in their mid- to late-twenties. That’s nearly a decade earlier than Baby Boomers who, on average, stared saving at age 35.
“Gen X and Y have accepted the reality of the past few years, and rather than being discouraged, they are using what they’ve witnessed to their advantage by saving earlier and regularly,” says Carrie Braxdale, managing director, investor services, TD Ameritrade, Inc., a broker dealer subsidiary of TD Ameritrade Holding Corp. “The hope is that tomorrow’s investors, Gen Z, follow suit as they near retirement.”
According to the survey, Gen Z (ages 13-22) generally understands the importance of saving money: Over half (56%) say they have a savings account, thanks to the influence of early conversations about money with their parents. But those conversations have largely been about saving in general (82%) or saving for college (67%), rather than preparing for retirement (38%). Just 8% of Gen Z reported they are currently saving money for their “golden years”.
The research adds many Gen Z savers have a view retirement saving strategies and timing differently than their parents:
• Just 35% of Gen Z respondents believe they will not be able to count on Social Security when they retire, and therefore should save money for themselves, compared to 61% of parents who report the same.
• Nearly 4 in 10 (39%) percent of Gen Z respondents believe they will have an inheritance, and therefore don’t need to worry about saving for retirement, compared to just 16% of parents who reported that they believed the same for their Gen Z children.
• Forty-three percent of Gen Z respondents believe that you can never start saving too early for retirement, compared to 71% of parents who reported the same.