Almost 40% of Gen Z (ages 13 to 22) believe they will inherit money, so they don’t need to worry about saving for their retirement, according to a new survey by T.D. Ameritrade. How many of their parents intend to do so?
Only 16% of their parents feel they will be able to leave their kids money. Yikes! These teens and young adults are not completely clueless about money. More than half have savings accounts, most of which are focused on saving for college.
How are older generations doing on the saving front? Almost 60% of Gen X and Gen Y sock away money regularly to build their nest egg, and started doing so, on average, in their mid to late 20s. Clearly, they understand much better than Baby Boomers how much time works in their favor, helping their money compound over time. Only 46% of non-retired Boomers make regular, automatic contributions to their retirement accounts, and on average began doing so at age 35.
How will that impact each group’s nest egg? If Gen X, Y and Boomers each save $3,000 per year ($250 per month) toward retirement, by the time each group reaches age 65 those Gen X and Gen Yers who started saving for retirement at age 25, would have a tidy $777,170 by age 65 (assuming 8% return on investments), while Boomers who started at age 35 will end up with $339,850 by age 65. That’s a $427,320 gap !
To end up with a retirement account as large as Gen X and Gen Y, Boomers will have to save more than $6,850 per year (about $571 per month) month starting at age 35.
Fantasy: Neither parents, Social Security, luck, nor a miracle will enable us to retire in comfort.
Reality: No matter how far off into the future retirement may be, we must all take very seriously the need to set aside money every month toward our retirement. In fact, the earlier we start, the more we will end up with. It is never too early to start saving. However, if you haven’t started, whatever your age, it’s not too late to do so. Every bit will help!