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Study: Younger Workers Putting Off Retirement Savings

epa04156638 A piggy bank is on display at the 'Secrets of Piggy Banks' exhibition at the Castle in Baranow Sandomierski, Poland. About four hundred piggy banks from around the world are presented at the exhibition. EPA/DAREK DELMANOWICZ POLAND OUT
EPA/DAREK DELMANOWICZ POLAND OUTEPA

Less than half of workers aged 20-29 contribute to a retirement plan, according to a study from payroll servicer ADP.

The study, comprised of anonymous payroll data from about 9 million employees in 2013, showed that 48.4 percent of those younger workers are putting money aside. And those that do contribute to plans do so at a relatively low rate, packing away just 4.9 percent of their salaries.

Across all age groups, 60.2 percent of employees are saving for retirement, putting 6.7 percent of their earnings to work.

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The 20-29 age group is the only one with less than half of its workers contributing to plans. No other age group registered at lower than 57.9 percent.

In the shadow of the financial crisis, young people have been wary of the stock market, as illustrated in a March Globe article about millennials’ hesitance to embrace the stock market. As one 25-year-old said in that story: “Growing up with fraud scandals and the larger market crash due to the behavior of these institutions, it becomes hard to trust an industry so brazenly breaking laws.”

The same article cited data showing 43 percent of people aged 25-35 identify as conservative investors, compared to 27 percent of Generation X and 31 percent of Baby Boomers.

With such a bad flavor in a whole generations’ mouth, the fact that nearly half of 20-to-29-year-olds are saving for retirement doesn’t look too shabby on its face. But that’s little consolation if it means the other half is flat-out ignoring retirement.

Earlier this spring, a graph from JP Morgan Asset Management circulated widely on the web, showed how putting money away for just 10 years—from 25 to 35—could ultimately net more for retirement than saving for 30 years from 35 to 65, due to compounding interest. In other words, the sooner you start saving, the better.

The ADP study shows a higher percentage of workers saving more as they get older, so that principle appears to have passed much of the workforce by. Employees aged 50-60 and 60-64 respectively stow away 7.7 and 9.2 percent of their salaries in an effort, as ADP puts it, to “catch up.”

The study also shows that women save a higher percentage of their salaries than men; employees at large businesses are more likely to save than those at smaller organizations but small business employees save at a higher rate; and—unsurprisingly—higher-salaried workers are more likely to save for the long-term.

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