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Worrying about kids’ retirement

By Jennie L. Phipps ·
Sunday, January 15, 2012
Posted: 6 am ET

Our grown children were with us for the holidays, and during that time, we talked to all of them about money and retirement planning -- ours and theirs.

A few weeks after the last of them left, I'm still chewing over our conversations.

The good news is that our older two are in much better shape than we were at their age. The oldest, who works for a church-related, nonprofit health organization, has a conventional pension and a 403(b) that her employer matches generously. Her husband has worked for the same big company for the last 20 years and has built up his own 401(k) to dizzying levels. They own their own home with no mortgage -- in large part because they have no kids and no plans to have them.

The second child is about to finish earning his MBA and already has accepted a well-paying job offer, and his wife just got a promotion that came with a 27 percent increase in salary. They already have a substantial amount of retirement savings, but these two pieces of good news are encouraging them to save more.

Then there are the younger three who have been harder hit by economic downturn. All of them are working, but none are making much, and none of them could even contemplate retirement. They're too focused on paying today's bills. I don't think that's unusual, but in this economic environment, it may not be good enough. Take a look at this chart, which was created by the Center for Retirement Research at Boston College:

Saving rate required for a medium earner to attain an 80 percent replacement rate with a 4 percent rate of return
Retire at: Start saving at:
25 35 45
62 22% 35% 65%
65 15% 24% 41%
67 12% 18% 31%
70 7% 11% 18%
Source: Center for Retirement Research at Boston College

An earner with a medium level income who wants to retire at 67 would have to save 12 percent of his income annually starting at age 25. I don't know about your kids, but my younger ones aren't even close -- and it worries me.

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