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Are the Young Better Savers than the Old?


When it comes to saving and investing, do today’s younger investors resemble the generation that came of age during the Great Depression?  A new survey suggests they may.

Released today by TD Ameritrade Holding Corp., the survey finds evidence that the most diligent savers are members of Generations X and Y (born, respectively, between 1965 and 1976 and 1977 and 1989). Among respondents in those two generations, some 25% and 23%, respectively, say they funded both a 401(k) and an IRA in 2010. In contrast, only 16% of baby boomers made contributions to both types of accounts last year.

Younger employees “are saving more rigorously than their parents and grandparents,” the survey concludes.

Other surveys have also found similarities between today’s young investors and those who came of age during the Depression. According to a recent WSJ article, Boston-based MFS Investment Management published a survey in June that concludes that investors in their 20s “held 30% of their non-401(k) portfolios in cash.” That’s four percentage points higher than the average for all investors,” the article says, adding that the survey also finds that “40% of investors in their 20s agreed with the statement: ‘I will never feel comfortable investing in the stock market.’”

“We had Depression babies,” MFS senior managing director Bill Finnegan says in the article. “Now I think we have recession babies.”

While a tendency to save more is certainly positive, financial advisors say that when young investors turn risk-averse, they potentially set themselves up for years of relatively low returns.

With baby boomers, by contrast, the Ameritrade survey points to inadequate savings rates. For example, although those 50 and over are eligible to make so-called “catch up” contributions to IRAs and 401(k)s, some 68% of those eligible are not taking advantage of the provision. (With catch-up contributions, an individual can stash away an extra $5500 annually in an employer-sponsored retirement account.) Half of those skipping catch-up contributions say they cannot afford to save more; Another 21% profess ignorance of the catch-up rules.

Conducted between July 20 and Aug. 17, the TD Ameritrade survey includes responses from 1509 adults between ages 22 and 81.


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    • Why save? Savers are penalized anymore. One does better to spend everything and wait for the government bailout, law-change requiring forgiveness, etc…
      What will the saver have gained when the dollar collapses along under the weight of reckless government spending?
      Better spend it while it still has some value.

    • The silly question posed (funding both IRA and 401k) is hardly likely to show a larger percentage of older workers funding both – there are income limits for IRA participation if you have a workplace plan and if you are over 50 with a steady work history you may exceed those. And if you have been laid off and are a consultant or have a small business, as many over 50s, you are in an either-or situation – you can’t do both a 401k and an IRA.

    • The youth today may have the shortest attention spans ever, but there’s no doubt in my mind that the Baby Boomer generation is/was/has been the most selfish generation ever.

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  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.