This is National Save for Retirement Week. A good time to encourage the next generation to start doing some retirement planning.
If you've ever tried it, chances are you know that getting kids in their 20s to save is a challenge. One of my sons just cashed out the automatic retirement plan he had when he worked for the State of Massachusetts. I tried to persuade him to roll it over into a IRA, but all he could see was dollars available to buy a new bass amp. He's not convinced he's ever going to get old.
ING Direct, a subsidiary of ING Bank, did a survey that proves that my son isn't the only 20-something dragging his feet. According to ING:
- Only 32 percent of 20-somethings are currently contributing to a retirement plan.
- The other two-thirds -- 68 percent to be exact -- don't have a retirement account at all.
- Just 19 percent have any kind of emergency savings.
- Some 21 percent say their highest financial priority is paying off student loans.
TIAA-CREF calculates that the average member of Gen Y will need to have accumulated a minimum of $1.4 million -- probably $2 million -- to live in retirement. It offers the chart below as an example of why this is true. I think it is pretty horrifying.
To get these numbers TIAA-CREF used the average 4.4 percent inflation rate for the past 39 years (1979-2010) and applied that rate to the next 39 years (2011-2050), to generate estimated costs.