A recent study done by ADP Research Institute, which analyzed parsed payroll data on nine million U.S employees aged 20 to 69 years old, shows that workers in their 20s save less money for retirement than their elders.
This is not shocking news – nor is it new. But the results are still alarming: the longer you wait to save, the less money you will have when retirement age hits. Workers need to understand the importance of saving from the start, and ADP is hoping that mentality gains traction in the younger set, as they are losing out on the advantage of time and compounding interest.
“We certainly see a need to engage younger generations earlier in the process,” says Chris Augelli, vice president of product marketing and business development at ADP Retirement Services. “As employees age, the awareness to save for retirement sinks in, and participation and savings rates accelerate.”
The average savings for adults (savings put towards various retirement accounts) holds steady of around 60% to 65% across the board for adults over 30 (each group is separated in age by decade). For the aforementioned younger group, the number is just shy of 50%. In all groups, more women than men saved (and more women were saving at higher percentage rates) and the higher income earners saved more than their lower income counterparts. However, the younger the worker, the less age and income mattered: they all saved less.
This is a pattern that needs to change. Interest rates are too low to see a significant increase in savings in just 20 years. With the current economy not having any major upswings, saving for your financial future may be more important than it ever has been.