What interest rate are you earning on your savings account? The fact that today’s bank savings accounts generate virtually no yield certainly makes it tougher to convince younger generations to save for retirement. Yet, while you might expect that low interest rates and, therefore, lower compound growth over time, would result in even more young Americans spending rather than saving, a recent TD Ameritrade survey found the reverse to be true. The survey found that Generation Y (teens and twenty-somethings) are more dedicated to saving than their parents and grandparents.
Specifically, the survey reported that 25% of Generation Y and 23% of Generation X who are in their 30s and 40s are saving in their 401(k) plans. This compares to just 16% of Baby Boomers. Generation Y can do better, however, by investing in appropriately diversified portfolios of stock and bonds. Somewhat surprisingly, the survey found that 40% of Generation Y will “never” invest in stocks.
The survey also illuminated another area for improvement. Although the vast majority of Boomers expressed worries about reaching their retirement goals, more than two thirds of those over age 50 (68%) did not take advantage of the catch up contribution provision to their employer-sponsored retirement plan that would have allowed them to sock away another $5,500 last year.
Working with a trusted financial advisor can ensure that you create a fully diversified portfolio that can minimize market volatility and take advantage of all opportunities to save for your short- and long-term goals.