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Retirement Outlook Not As Bad As Seems

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The Tampa Tribune

Published: December 30, 2007

Like father, like son.

That was my immediate reaction to a new federal study that said more than one out of three of today's 17-year-olds won't have any money saved up once they hit retirement age in the 2050s and beyond.

Not surprising, I thought, given that many teens may simply be following in the footsteps of their parents, who aren't saving enough in 401(k)s or other retirement plans either. After all, nobody is born with the savings gene; it's a learned habit that should come from parents setting the example.

The Government Accountability Office report was based on computer simulations of savings and spending tendencies. According to the study, low-income workers in the future could be most at risk during retirement years: 63 percent of them will have nothing in private saving and investment accounts.

Given the long-term challenges of funding Social Security along with rising health care costs, the report should raise giant red flags for future members of the work force who are now in high school or college classrooms. But, do the findings portend a retirement catastrophe for our sons and daughters?

Barbara McMahon, a financial planner with Waddell & Reed in Kansas City, Mo., doesn't think so.

"My experience is that once they her twentysomething clients get past the acquisition stage of life, many do begin to plan for the future," McMahon said.

I'm not a doom-and-gloomer either. Although the study accentuated the negative, here's another way to look at the data: Two-thirds of today's teens will have socked away savings at retirement age in the 2050s.

That's the scorecard that gives me hope for future generations.

Still, there is always more the younger generation can do to shore up its financial future.

Start with a bit of financial blocking and tackling: Begin saving at an early age so interest will build and build, make savings automatic at full- and part-time work with payroll deductions; take advantage of free money and tax breaks from employer savings matches; and remain vigilant about spending year in and year out.

Here are some other ideas.

Keep score. "Use a spreadsheet, or a notebook or a Web site," said Michael Stahl, author of "Early to Rise: A Young Adult's Guide to Investing ... and Financial Decisions That Can Shape Your Life." "Just keep track of your savings and refer to it every few weeks. You'd be surprised how enjoyable and exciting it can be to see your number go up again and again."

Open a Roth. Have your children earned money from babysitting, lawn mowing or an after-school job? Then they're candidates for Roth IRAs. Not only will their earnings grow tax-free, but withdrawals are tax-free as well.

Join the club. If you've noticed your son or daughter checking stock quotes online, then perhaps it's time to recruit some of their like-minded friends to form an investment club, a fun way to invest and learn about the markets.

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