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US News: 5 Reasons Millennials Aren't Saving for Retirement

US News: 5 Reasons Millennials Aren't Saving for Retirement
(Dollar Photo Club/Rob Williams)

By    |   Tuesday, 07 March 2017 02:05 PM

Saving for retirement from an early age gives an investor a longer period to benefit from the effects of compound interest and dividend reinvestment.

Ideally, millennials in their 20s and 30s have started to save, but new research suggests they aren’t creating a nest egg with employer-sponsored savings plans like a 401(k).

“Less than a third (31 percent) of millennials participate in a traditional pension or 401(k) plan through their job,” according to U.S. News & World report, which cites a Pew Charitable Trusts analysis of Census Bureau data. “That's significantly less than the half (48 percent) of all workers who use a retirement plan. Here's a look at why millennials are having a difficult time building wealth for the future.”

A 401(k) allows an employee to set aside part of their pay in an account that will grow tax-free. Many employers offer matching plans that magnify the effect of saving.

The Pew study found five top reasons that millennials aren’t saving for retirement.

  1. They take jobs without retirement benefits: “Startups and small businesses are attractive places to work for many young people, but they seldom provide retirement benefits. Some 41 percent of millennials age 22 and older don't have access to a pension or 401(k) through their employer, compared to 35 percent of all workers, Pew found.”
  2. They aren't eligible for the 401(k) plan: “There might also be a waiting period or eligibility requirements that prevent new or young workers from immediately joining a 401(k) plan.” Also, younger workers may need to find two part-time jobs to make ends meet, but they are not eligible for full-time benefits. Employees who don’t participate in a 401(k) may be eligible to save money with an individual retirement arrangement.
  3. They fail to sign up: “ Only about half (52 percent) of millennials sign up for a 401(k) plan when they have the opportunity to do so, compared to nearly three-fourths (72 percent) of all workers.”
  4. Parenthood and homeownership responsibilities: “Millennial parents (36 percent) are slightly more likely than millennials without children (32 percent) to say they can't afford to participate in the 401(k) plan.”
  5. Low salaries: “About half (54 percent) of millennials earning less than $25,000 per year participate in a 401(k) if it is offered, while 70 percent of employees earning $50,000 to $99,999 and 80 percent of people earning $100,000 or more invest in 401(k)s."

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Saving for retirement from an early age gives an investor a longer period to benefit from the effects of compound interest and dividend reinvestment.Ideally, millennials in their 20s and 30s have started to save, but new research suggests they aren't creating a nest egg...
millennial, 401k, saving, retiremnet
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2017-05-07
Tuesday, 07 March 2017 02:05 PM
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