Seems as though more young workers are serious about saving for retirement — because they’ve seen the struggles their Baby Boomer parents have gone through.
In what could be a rare example of the positive effects of the recent recession, an increasing number of young employees are participating in their companies’ 401(k) plans, according to a recent story in the Wall Street Journal.
Quoting data from retirement plans managed by Vanguard Group, the WSJ story says among employees under age 25, 44% participated in their companies’ 401k retirement plans in 2011, up from just 27% in 2003. Of those ages 25 to 34, 63% participated in 2011, up from 58% in 2003, the data says.
Those younger employees have also lowered their credit-card debt, according to the story. About 45% of Americans under 35 had credit-card debt in 2010, compared with 63% in 2002, according to data from Strategic Business Insight’s MacroMonitor quoted by the WSJ.
The average credit-card balance for those under age 35 fell to $4,100 from $5,100 over that period, adjusted for inflation. The under-35 group was the only age group that saw average credit-card balances fall.
Shocked into action
So what’s the story behind all this new-found financial virtue? At least partly, it’s the result of young workers seeing how hard a time their Baby Boomer parents have had as they near or go into retirement.
One story cited by the WSJ concerns a 54-year-old woman who lost her job as an administrative assistant and lost her family home. Her son asked, “What if life throws me a curveball like that?”, and he and his wife immediately embarked on a retirement savings program.
Another tale involves a successful lawyer who had to delay his retirement after the stock market went into the dumper in 2008. That caused his 26-year-old daughter to rearrange her savings priorities — she now sets aside more than half her salary into two retirement accounts.
Sad stories, useful tool
These kinds of stories might well provide some fodder for your benefits people to use in their efforts to pump up 401k plan participation.
It’s hard to get younger workers to take retirement seriously — after all, who’s really going to worry about something that isn’t going to become an issue for 25 or 30 years?
But these stories of struggle — along with the growing worry that Social Security may not even exist when it comes time for young workers to call it a day — could hit home.