Younger generation not saving for retirement

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Younger generation not saving for retirement

By T. Shawn Taylor, Knight Ridder News Service via Salt Lake Tribune
October 27, 2003

    Even as younger workers watch parents and older generations go back to work after retiring because their savings were not adequate, they still are not doing enough to provide for their own financial futures.
    Twenty-nine percent of American workers say they have not begun to save for retirement, and 61 percent have not calculated how much they will need to save to reach their retirement goal, according to a recent survey by the Employee Benefit Research Institute in Washington .
    Jeff Hinrichs, 28, of Chicago , said he probably will be 40 years old before he can start socking away money. Meanwhile, he has to pay off about $30,000 in student loans and a $30,000 hospital bill from a three-day stay a few years ago to control his diabetes.
   Hinrichs also has seen how unexpected events can impact retirement savings by watching what has happened to his father, 59, and stepmother, 52. Both have good jobs -- he is an administrator for the United Way in Baton Rouge , La. , and she inspects nursing homes. But they blew a chunk of their retirement money on two homes that needed expensive repairs. The houses were purchased as a result of job changes.
    Hinrichs remains confident he will be able to retire comfortably, though he hasn't saved a penny. In the back of his mind, Hinrichs still hopes he will hit the lottery or sell for millions of dollars a movie script he has written on the side.
    Many people dream of having luxurious retirements, but rarely do things turn out the way they planned, said William Gale, senior fellow of economic studies at the Brookings Institute in Washington .
    Today's younger workers not only face longer life expectancies -- many may live well into their 80s and 90s -- they also will have to work longer to maintain their lifestyles. Otherwise, they risk sliding into poverty when they are too feeble to work.
    "Something's got to give. If people work longer, they not only have more income from which to save, but they have a shorter retirement to finance. Both make it easier to accumulate wealth," Gale said.
    Generation Xers born between 1960 and 1980 face other obstacles to building nest eggs. Many are mired in credit card and college debt while experiencing extended periods of joblessness as they work in industries hit hard by swings in the economy and the movement of jobs overseas.
   Younger people also marry and buy homes later than previous generations, and that doesn't help their finances.
    "I think that waiting longer to do everything from child-raising to buying a home will put them a bit behind the eight ball in terms of building wealth," said Don Blandin, president of the American Savings Education Council.
    "If you stay single or even live together paying rent, you won't have the tax advantages of someone who is married and has a home."
    Workers in their 20s and 30s often need a second household income to make ends meet. Many singles share the rent and more couples are living together. But even with two incomes, most aren't saving any more for retirement.
   Blandin suggests workers closely examine the Social Security statements they get in the mail every year, put together a retirement plan and alter it when necessary.
    "It's like any goal. You have a plan. It's not set it and forget it. You have to fine tune it every year," Blandin said.
    Such planning is more critical for young people as traditional safety nets such as Social Security, employer-funded pensions and company matches to 401(k) accounts can't be counted on.
    Those who fail to plan and save for retirement are deciding they will work into their 70s or 80s or will never retire.
    Carter Kennedy said he intends to work way past retirement age anyway.
    "Retirement is not appealing at all. I'd go insane," said the 41-year-old bond option trader at the Chicago Board of Trade.
    Kennedy said he sees the retirement bubble starting to burst, but he doesn't believe he will be affected by it. His six-figure salary has enabled him to create a substantial stock portfolio and to make another key investment: a four-level house in Chicago 's exclusive Lakeview area.
    Though he has had major stock losses in the past three years and splurges on things like cars -- he owns a Porsche -- and good wine, he fully expects to be able to retire from trading at age 48.
    "I want to spend the rest of my career doing something meaningful, like work for a nonprofit or environmental causes," said Kennedy, adding that will be contingent on his ability to obtain flexible scheduling and lots of time off.
    "I'd like to spend summers in Harbor Springs [in northern Michigan ] and do nothing the whole summer. Or have a month off here or there. As long as I'm not tied to my job."
    Despite the economics lessons that beg to be learned, many of the newest work force entrants carry the same get-rich-and-retire-early expectations. In some ways, it is part of growing up.
    Perhaps they will get lucky, Blandin said.
    "Sometimes, people think the worst, and when they get there, it's better than they thought," he said. "I honestly hope they'll all be all right.