Teens Don't Save for Retirement – Are You Surprised?

According to an Earth-shattering study, teenagers don’t save for retirement. From the CNN article:

Teenagers flipping burgers, stocking shelves or studying for finals don’t think about their retirement.

Sarcasm aside, I don’t think anyone should be too shocked by these findings. Look back to your high school days and whatever part-time job you had. If you were working a few hours a week after school you were more than likely just trying to scrape together enough money to put gas in your tank or to buy that new Led Zeppelin album. The furthest thing from your mind was saving for retirement.

In addition, most jobs that teenagers have won’t even have an option for saving in a 401k or similar account, so it isn’t an easy thing for a young person to do. Just because a teenager working part-time might not have easy retirement savings options through their employer doesn’t mean they should ignore the issue.

Some Cause for Concern

While the article does a good job at pointing out the obvious, there are a few startling statistics.

The GAO report estimated 36.8 percent of today’s 17-year-olds will have no money in a 401(k) or similar plan when they retire. The numbers will be worse for low-income workers: 63 percent of them will have zero dollars in a 401(k)-type account when it comes time for them to retire.

Now this is a bit alarming–over 35% of teenagers today will retire with no money saved in a retirement account when they retire. At 17, they likely have 45-50 years until retirement. Can anyone honestly say that Social Security in some form or another will be around in 50 years to provide any reasonable retirement income? And with the demise of the fat pension plans offered by employers coupled with the fact that most people today change jobs a dozen times throughout their career, having no money saved for retirement is a sure way to poverty.

This doesn’t mean that your childhood should be marred by concerning yourself with saving for retirement when you’re more concerned with who to take to the prom, but the problems come when this lack of concern carries on beyond working the night shift at the Burger Shack. Once someone begins to have any sort of steady income in college and beyond, it should become a priority to begin saving at least something in an employer-sponsored plan or through an IRA. It doesn’t have to be a lot and you don’t have to max out your contributions because what is more important than the money is simply getting into the habit of automatic saving. That habit will carry on throughout your life and ensure you will be on your way to building wealth.

Do Your Part to Help

If you currently have children or plan on having children, it is up to you to make sure they don’t become one of the 36% who will retire without a penny saved. Our schools won’t educate them as to how important it is to save for retirement, so it is up to you. And remember, children are impressionable, so lead by example. Practice what you preach and be open about it so that they can easily see how important it is so they can follow your actions.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.