Due to a rapidly changing economic landscape, young people around the world face an unprecedented amount of retirement challenges. Many workers in their twenties are new to the financial planning process, but already believe their retirement future will fall short of older generations.
After witnessing a global recession and experiencing first hand the heavy burden of debt, 59 percent of adults between the ages of 20 and 29 in the workforce expect to be worse off financially in retirement than their parents, according to a new survey from Transamerica Center for Retirement Studies in collaboration with Aegon. Furthermore, 28 percent believe that during their own retirement they will need to financially support their aging parents. Young adults recognize the need to take on more financial responsibility, but 37 percent say they will likely fail to meet their retirement needs.
“Getting into the workforce is hard for anyone at any time, but it’s even harder now. By and large, job prospects are difficult,” Catherine Collinson, president of the TCRS, said in a phone interview. “In the United States, the well-publicized issue of student debt makes it even more difficult. People are entering the workforce at 22 years old, and rather than having a blank balance sheet ready to start building savings, they are entering the workforce with significant amounts of debt.”
Over a third of twenty-somethings are pessimistic that they will not have enough income to live on in retirement, while 44 percent doubt they will be able to choose when they retire. Additionally, 37 percent believe their retirement needs will fall short by a wide margin, at least half of what they estimate to need in retirement.
The pessimism was evident around the globe, as the survey polled 10,800 employees in 12 countries. “Government retirement systems can vary across country boarders, employer benefits vary across countries, but people are essentially the same,” explained Collinson. “We all share the same wants and needs, hopes, and desires, and the need to save and plan for a financially secure retirement.”
Although many younger employees have a desire to save for retirement, the majority are failing to do so. In fact, 41 percent of respondents between the ages of 20 and 29 say they are not saving for retirement, but intend to in the future. Only 25 percent always make sure to place money aside on a regular basis, while 7 percent have never saved and don’t plan on ever saving for retirement.
Unsurprisingly, over half of twenty-somethings say a pay increase would encourage them to save for retirement. Additionally, 34 percent say more generous tax breaks on long-term savings and pensions products are needed.
Fifty-two percent of young adults have no retirement planning strategy. However, simply creating a written plan as soon as possible dramatically increases the possibility of a successful retirement. TCRS also recommends to save consistently and seek out a financial advisor if you need additional help. “Circumstances change, but if you can start with a plan in your twenties, and reevaluate along the way, you are vastly improving your chances of a financially secure retirement,” explained Collinson.
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