Saving for Retirement Declines Among Younger Workers

The latest news from the annual survey conducted by the Employee Benefit Research Institute is that although overall confidence in retirement benefits has stabilized, younger workers are saving less than their counterparts ten years ago. Workers aged 25-34 expect to retire later in life than those in that age bracket surveyed ten years ago. It is a dangerous combination — saving less money and expecting to live longer. What it indicates is an erosion of worker confidence in retirement benefits.

In a sub-survey the EBRI asked workers about 401k plans. What they discovered is that more than ever, education plays a major factor in whether or not a worker participates in a 401k plan. People with high school education or less, no matter the wages earned were significantly less likely to save for retirement via a 401k account.

The 401k rules can be daunting. Researching safe harbor 401k rules or 401k withdrawal rules can take time and energy. Just starting a 401k account is pretty simple but even that seems to be a hurdle for the less educated among workers. The nice variety of 401k plans is a great help to people, giving the American worker some extra boost in the world arena. But the rollover/401k rules are different depending on the plan and the company and that could be a road block for workers. Figuring out how to make Roth 401k rules and IRS 401k rules understandable is a challenge that benefit administrators face every day. The facts show, however, that when a company takes the time to educate workers, participation in 401ks and IRAs sharply increases.

Not surprisingly, the younger workers surveyed (the survey asks workers within a age range of 25 years old up to 65+ years old) were less likely to have any money saved in any sort of account, 401k or otherwise. It is hard, in this climate to encourage younger workers to save for retirement. They hear so little hopeful news about their work future. It is our job to help them look for the bright spots and to create a savings plan.