Young Americans Start Saving for Retirement 10 Years Earlier than Parents, Grandparents
When it comes to retirement planning, Generations X and Y have learned from the mistakes of their elders2, while the younger Generation Z shows some signs of nest egg naivety1, according to new survey findings released by TD Ameritrade Holding Corporation (NYSE: AMTD).
Nearly 60 percent of Gen X (59%) and Gen Y (56%) make regular, automatic contributions toward their retirement savings2, compared to 46 percent of non-retired Baby Boomers2. And when it comes to getting a jump on their nest egg, younger generations are eager to get started – both Gen X and Gen Y started saving for retirement, on average, in their mid- to late-twenties2. That's nearly a decade earlier than Baby Boomers who, on average, stared saving at age 352.
“For even the most sophisticated investor, retirement planning can be a tough concept to grasp,” said Carrie Braxdale, managing director, investor services, TD Ameritrade, Inc., a broker dealer subsidiary of TD Ameritrade Holding Corporation. “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. The hope is that tomorrow's investors, Gen Z, follow suit as they near retirement.”
For the teens and young adults of Generation Z (ages 13-22) who have grown up in households that struggled through the recession, the question remains as to whether they have been tainted by the gloom and doom or driven to be better. According to the survey, Gen Z generally understands the importance of saving money – over half (56%) said they have a savings account – thanks to the influence of early conversations about money with their parents1. But, those conversations have largely been about saving in general (82%) or saving for college (67%), rather than preparing for retirement (38%)1. Just eight percent of Gen Z reported they are currently saving money for their “golden years”1.
In fact, many Gen Z savers have a very different outlook on retirement saving strategies and timing when compared to their parents:
- Just 35 percent 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 percent of Parents who reported the same1.
- Nearly 40 percent (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 percent of Parents who reported that they believed the same for their Gen Z children1.
- Forty-three percent of Gen Z respondents believe that you can never start saving too early for retirement, compared to 71 percent of Parents who reported the same1.
“The good news is that Gen Z is starting off with a good understanding of the importance of saving,” said Braxdale. “But that doesn't mean they should wait to become more educated on proper long-term savings habits. We encourage parents to talk to kids specifically about retirement savings to ensure they understand the importance of getting a head start and taking advantage of the power of compounding.”
1. A "Cost of Waiting" Calculator that can help you understand why starting to save earlier is better in the long run
2. WealthRuler™ retirement calculator that can help you estimate your retirement readiness
3. Access to a network of knowledgeable, independent registered investment advisors (RIAs) through the TD Ameritrade AdvisorDirectTM program.
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1Survey Methodology-Gen Z
2,001 U.S residents participated in an online survey from April 27-May 1, 2012 by Head Research on behalf of TD Ameritrade Holding Corporation. The 2,001 survey respondents sample was drawn from major regions in proportion to the U.S. Census — New England (5%); Mid-Atlantic (16%), South (25%), Midwest (22%), Southwest (12%) and West (20%). In each region, approximately half of the respondents were male and half were female. The two primary groups included were: Gen Z = 1,001 (born 1990 to 1999) and Parents of Gen Z = 1,000 (has a child in their household aged 13 to 22). The statistical margin of error for major groups (i.e. Gen Z & parents of Gen Z) in this survey is ±3.1%. This means that in 19 cases out of 20, overall survey results for primary groups in the study (i.e., Parents of Gen Z or Gen Z) will differ by no more than 3.1% in either direction from what would have been obtained by measuring the opinions of all target group members born in the U.S.
2Survey Methodology-Retirement Reformation
An online survey was conducted with N = 2029 U.S. residents from March 27-28, 2012 by Head Research on behalf of TD Ameritrade Holding Corporation. The sample was drawn from major regions in proportion to the U.S. Census: New England (5%), Mid-Atlantic (16%), South (25%), Midwest (22%), Southwest (12%), West (20%). In each region, half of the respondents were male and half were female. Quotas ensured at least n = 500 respondents from each age cohort of interest to TD Ameritrade: Mature Generation (1930 to 1945): n = 502 ("Matures"); Baby Boomers (1946 to 1964): n = 504 ("Baby Boomers"); Generation X (1965 to 1976): n = 505 ("Gen X"); Generation Y (1977 to 1989): n = 518 ("Gen Y"). All respondents were required to be sole or shared decision makers with respect to planning and saving for retirement. The average time required to complete the survey was 10 minutes. The statistical margin of error in this survey is +/- 2.2%. This means that in 19 out of 20 cases, survey results based on N = 2029 respondents will differ by no more than 2.2% in either direction from what would have been obtained from the opinions of all adults born from 1930 to 1989 in the U.S.
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About Head Research
Head Research is a division of Head Solutions Group (U.S.) Inc., a leading market research partner for Financial Services companies in North America. With offices in New York, Toronto, and Montreal, Head delivers the deep customer insights that increase institutional knowledge and propel business action.
Head Research and TD Ameritrade Holding Corporation are separate, unaffiliated companies and are not responsible for each other's products and services.