Gen Y and Retirement: Are Young People Saving?

Older generations are now struggling to catch up with retirement savings. But what about Gen Y — has coming of age during a bad economy scared them into saving more? Or, are they blowing it off like homework?

Alex Cao | Getty Images To save or not to save — that is the question!

According to a recent retirement survey from Scottrade, the answer is: homework.

More than half — 55 percent — of Gen Yers surveyed said they have not yet started saving for retirement. A whopping 64 percent said they don’t even think about retirement.

“The most compelling thing out of the study is that Gen Y is surprisingly indifferent about retirement,” said Carrie Hibbs, a spokesperson for Scottrade.

Of all the non-retired generations, including Baby Boomers and Gen Xers, Gen Y is the leader in not saving, the report showed. “We call them Generation Procrastination!” Hibbs said.

“I haven’t really thought about retirement,” said 24-year-old Dawn Kwan, who works for a nonprofit organization in Menlo Park, Calif., citing her age as the reason. She describes herself as a big saver, but chooses not to participate in her employer’s 401(k) plan, because she wants her money “to be mobile.”

In fact, when Scottrade asked what age a person should start saving for retirement, the mean age of Gen Y’s response was 29.2, which would give even the oldest Gen Yers two more years before they would start saving.

It’s a stark contrast to Boomers, many of whom are the parents of Gen Yers, who are approaching retirement age and wishing they had started saving sooner. Nearly half — 46 percent — said they started saving at 35 or older, but only one in 10 now think that was a good age to save. Half recommend saving at 25 or younger.

Matt Wallaert, a 20-something who’s the lead scientist at GetRaised.com, a site that that helps guide you through asking for a raise, takes issue with Gen Y being called lazy for not saving for retirement.

“Certainly Gen Y has a heightened awareness of saving money because of the economy and all the publicity about it,” Wallaert said. “Certainly it’s on people’s minds in a way that I don’t think it’s been at other times. That said, in order to save money, you need to A) not be in debt and B) have a steady or high enough income to save. Gen Y doesn’t have access to those,” he said.

Chris Prouty, a 25-year-old in San Francisco who has a “massive credit-card bill and no savings” agrees.

“The economy shares blame with my lack of savings and racked up credit-card bill,” Prouty said. “People in their 20s are the first on the chopping block when it comes to layoffs.” He says he tries to save $50 out of every paycheck but that money often gets eaten up by big expenses like car repair, vet bills or some odd medical expenses he’s incurred in the past six months like a lung infection and scarlet fever.

Even among Gen Yers who have jobs, many have been hired as freelancers or contractors, which means no benefits — and no job security. That makes it hard to think about retirement when you’re not even sure what’s going to happen next year.

And, Wallaert says, if you manage to get a job with benefits, it’s often the case that you have to work at a company for a year or be of a certain age before they will start matching what you put in, so there are a lot of obstacles for Gen Y that may be impacting their decision to save or think about retirement.

“Building a nest egg is important,” Prouty said, but “you can’t save if you’re living hand to mouth.”

“Gen Y’s procrastination doesn’t stem from a lack of awareness,” Hibbs said.

Nearly three-fourths (73 percent) of Gen Yers surveyed by Scottrade said they think that they’re not saving enough for retirement, compared to 61 percent of the general population who said that.

Gen Y leads all generations in worrying about Social Security running out and the number of Gen Yers who are worried they will have to work in retirement to pay their living expenses jumped to 38 percent from 27 percent just two years ago.

Kwan said she’s “kind of, sort of” worried about not having enough money when she’s her parents’ age, knowing that working in nonprofit may not earn her enough money. “But I don’t really worry about it now,” she said.