The Wall Street Journal illustrates why young people are beginning to save more despite, or perhaps because of, poor economic conditions.
For years, Sean McGroarty ignored his mother’s urging to save money.
Then his mother, Karen Zader, 54 years old, lost her job as an administrative assistant. The family home, where Mr. McGroarty grew up, went into foreclosure, and Ms. Zader had to raid her retirement savings to pay bills. [snip]
As older Americans lose jobs, lose homes and delay retirement, their children are watching and reacting. Growing numbers of young Americans are boosting savings, cutting spending and planning for retirement. …
But young adults are now saving more and starting earlier than people their age used to, according to several broad measures.
Participation in 401(k) plans is up. Credit card debt is down.
The younger generation may well be doing a better job getting ready for retirement, often nearly 40 years down the road, than their parents. And it’s a good thing. While their parents may have had a company pensions when they retired, most young people do not. Many younger workers don’t believe that Social Security will be there for them when they retire. Other government “entitlement” programs are projected to be insolvent in the long term
Many young savers cited the fear that government retirement programs will be gone or curtailed by the time they qualify.
“Friends of mine in our 20s, we joke that there isn’t going to be any Social Security when we get old enough to collect,” said Mr. McGroarty, the DJ. “But it isn’t really a joke. What are we going to do after we retire?”
As they see their parents struggle financially, the younger generation is taking the lesson to heart that financial independence can be achieved, but it requires putting money aside in 401(k)s, IRAs and Roth IRAs and investing it wisely. That’s where getting professional advice from an RIA is valuable.