Actions Speak Louder than Words

August 27, 2008 ( - While the younger generations say they have lofty financial values and goals, their actions do not yet match their words.

A survey commissioned by the American Savings Education Council (ASEC), a program of the Employee Benefit Research Institute Education and Research Fund, and AARP (on behalf of Divided We Fail) found 91% of young adults at least somewhat agree that they have financial goals for themselves, including just over half who strongly agree (52%). Asked to identify goals from a list of potential objectives, advancing one’s career and earning more money ranked first (76%), followed by putting money away for retirement (75%), minimizing stress (74%), and paying off debt (73%).

The 19 – 39-year-old surveyed are very optimistic, with more than four out of five who identified goals for the future feeling at least somewhat confident that they can achieve their most important goals within the next ten years (92%). Most respondents reported that they are already on track or even ahead of schedule when it comes to their family life (70%) and housing situations (58%), and more than half say they are on track or ahead with regards to their career (54%) and education (52%).

In addition, half of those surveyed are optimistic that by the time they are their parents’ age, they will have accumulated more money than their parents (54%); just two in ten feel they will accumulate less (19%).

When it comes to retirement, the majority of young adults report they have given at least some thought to their own retirement (62%), including 20% who say they have given the matter a great deal of thought. The older Gen Xers (70%) are considerably more likely than the younger Gen Yers (51%) to have given some thought to their retirement situation. However, only 38% say they or their spouse have personally saved money for retirement, not including Social Security or employer-provided money – about half of that found among the non-retirees age 40 or older surveyed in the 2007 Retirement Confidence Survey (71%).

Two-thirds of young Americans feel they are behind schedule in having general savings or in saving for an emergency (67%), and nearly as many say their retirement savings are behind schedule (61%). More than four in ten (46%) indicate they are behind when it comes to their debt level. Despite feeling behind, 59% of young Americans are confident that, when they retire, they will have saved enough to afford a comfortable lifestyle in retirement, including 11% who are very confident in their ability to do this.

Young adults are doing well saving for retirement through the workplace. Those who are employed are twice as likely to be eligible for their employer’s defined contribution retirement savings plan, such as a 401(k) or 403(b) (50%), compared to being covered by a defined benefit program (23%). Overall, seven in ten (71%) of those eligible to participate contribute money to their employer-sponsored defined contribution plan. The older Gen Xers (57%) are more likely than Gen Yers (39%) to be eligible for a defined contribution plan, and are also more apt to be active contributors (76% versus 62%, respectively).

Forty-one percent of young adults expect that when they retire, employer-sponsored defined contribution plans will be their largest source of retirement income, followed by other personal savings or investments not in a work-related retirement plan (19%). Few anticipate relying on Social Security (7%).

About half of young adults believe that it is harder for people in their generation than it was for people in their parents' generation (many of whom are Baby Boomers or in the Silent Generation) to support a family (54%), save for the long-term (51%), save for a child's college education (50%), and buy a first home (47%). More than four in ten think that it is harder for those in their generation to find good employment (44%).

The one exception to the view that older generations had it easier concerns getting an education; more than half (54%) feel that it is easier for people their age to "get an education" than it was for their parents' generation.

Overall, only 22% of survey respondents say they are very or somewhat confident that, when they retire, they will receive Social Security benefits comparable to what retirees receive today. The percentage is similar for confidence that Medicare will be able to deliver comparable benefits (28%).

Topping the list of perceived financial differences between the generations is the cost of living, with two in ten young people (19%) saying it is the most significant differentiator between their generations and older generations. Just as many (18%) state that the biggest difference relates to retirement, including fewer pensions and less reliance on government entitlement programs.

More than eight in ten younger Americans report having some type of non-mortgage debt (83%). Specifically, nearly two-thirds say they have credit card debt (63%), about half have a car loan (48%), 31% have student loans, 27% have medical debt, and 22% say they have some other type of non-mortgage debt. In addition, just over one-third (35%) report that they have a mortgage and one in ten (11%) say they have a home equity loan.

However, almost two-thirds of those with any kind of debt (63%) and a similar share of those with non-mortgage debt only (62%) describe their debt obligations as either a minor problem or not a problem at all.

The survey found that young Americans appreciate workplace benefits and opportunities to save. When it comes to the importance of certain workplace benefits, health insurance (94%) ranked as the most important benefit for employers to offer, and 64% indicate it is their top priority among the five benefits evaluated in the survey. Nearly as many respondents report that having a retirement plan, as well as company matches or company contributions to that plan, are important (88% and 89%, respectively).

Although few identify them as a top priority, many appreciate wellness programs and retirement planning education in the workplace (78% and 77%, respectively).

The study surveyed 1,752 individuals ages 19 to 39 years old. Gen X is defined to include those born between 1968 and 1979 and Gen Y includes those born between 1980 and 1988.

A copy of the complete survey report is here .