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Financial picture brightens for millennials (but not boomers)

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Millions of Americans drew down their retirement savings to pay for an emergency during the year past, according to a new report.

Bankrate.com unveils this finding in a survey conducted by Princeton Survey Research Associates International (PSRAI). The report finds that 21 million Americans aren’t saving for retirement at all.

The research shows that millennials are the least likely to dip into their retirement funds prematurely (only 8 percent did so over the past 12 months). In fact, millennials are the most likely age group to note an improved overall financial situation over the past year (40 percent say they’re better off and just 11 percent say they’re doing worse).

The numbers tell a more troubling story for 50-64 year-olds. More than one-quarter of boomers (26 percent) say their financial situation has deteriorated over the past year — more than any other age group. And 17 percent recently dipped into their retirement savings to pay for an emergency.

“Using retirement savings to cover an emergency is a permanent setback to retirement planning, with the possibility of taxable distributions, early withdrawal penalties, loss of tax efficiency, and the inability to replace withdrawn funds in future years,” says Greg McBride, Bankrate.com’s chief financial analyst.

Among the report’s additional findings:

  • The Bankrate.com Financial Security Index rebounded after sliding the past two months and now stands at 102.6 ­— the best since June.

  • Job security is a particular strength: People who feel more secure today than a year ago outnumber those who feel less secure by more than two-to-one.

  • Savings is the one major area where Americans note deterioration, with 30 percent saying they feel less comfortable with their savings now compared to one year ago against 18 percent who feel more comfortable.