There was a very interesting article (Pitching 401(k)s to Generation Y is a Tough Sell) in today’s Wall Street Journal about how 401(k) firms are having a hard time getting Generation Y to save for retirement. In my opinion, here’s why retirement planning is such a tough sell to Generation Y:
They Have Too Much Debt. Too many young people are worried about getting out of debt (or at least that’s what they say). Student loans and credit card debt are the culprits.
They Earn a Low Income. Young people are at the beginning of their careers, which means their incomes are lower.
They Either Have No Budget or Low Budgeting Skills. Without a budget, it is hard to prioritize spending. If everything that comes in, goes right back out, saving for retirement will be impossible.
They Are Worried About Today. When you are 25, it is VERY HARD to think about retirement, which is 30+ years away! With retirement so far away, a lot of young people believe that they can put off saving for it until they are older. As this post suggests (a MUST READ in my opinion), putting off saving for retirement just ONE year can have a tremendous negative impact on a retirement plan.
They Don’t Understand the Power of Compounding on Investment Returns. Although a young person may not have a lot of disposable income, one thing they do have is TIME! Don’t waste it. Not convinced? Take a look at How Much You Can Save in a Lifetime?