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LIMRA: Top Five Ways Gen X and Y Consumers Can Improve Their Chances for a Secure Retirement

WINDSOR, Conn., April 18, 2013 —LIMRA research reveals that the majority of Generation X and Y consumers have little understanding of financial products and services and less than half make saving for retirement their top priority.

“There are nearly 116 million Americans aged 20 to 47, and most of them will have to rely solely on their savings to fund their retirement,” said Alison Salka, corporate vice president and director of LIMRA Retirement Research. “Yet our research indicates that few of these consumers are taking full advantage of the retirement savings vehicles available to them. The decisions these consumers make today will have a lasting impact on their ability to be financially secure in their retirement years.”

Based on LIMRA’s research, if you are a Gen X or Gen Y consumer, there are five things you can do now to improve your chances in building a secure retirement.

  1. Improve your financial knowledge. Sixty percent of Gen X and 54 percent of Gen Y consumers admit to having little to no knowledge about financial products and services. Once they learn about available options, Gen X and Y consumers can make smart decisions about investments and savings habits that will help them achieve their financial goals. 
  2. Get Help. LIMRA research has found that consumers who worked with an advisor were more likely to contribute to a retirement plan (78 percent vs. 43 percent), more likely to save at a higher rate (61 percent vs. 38 percent), and feel more confident about their retirement prospects (71 percent vs. 43 percent). LIMRA’s study found that Gen X and Y consumers have little tolerance for investment risk – yet this is the time when they should be more aggressive about their portfolio to achieve the growth needed to reach their long-term financial goal. Gen X and Y consumers who worked with a financial professional had a higher tolerance for investment risk. 
  3. Participate in employer-sponsored retirement savings plan or start an IRA. Gen X and Y workers should enroll in their employer-sponsored retirement plan or establish an IRA to take advantage of the tax-deferred savings and matching contributions (offered in DC plans). LIMRA research finds that 56 percent of younger Americans, (ages 18-34) are not currently contributing to a retirement plan. It is likely that defined contribution (DC) plans will be a major source of savings for Gen X and Y consumers. For the 75 percent of Gen X and Gen Y consumers with access to a DC plan and enjoy employer-matching contributions — not taking part is leaving free money on the table.
  4. Steadily increase your contributions. If offered through the employer, Gen X and Y should take advantage of the automatic contribution escalation and automatic rebalancing of assets features to ensure they are reaching their savings goals and are invested appropriately. If these features are not offered through their plan, Gen X and Y workers should increase their contribution rates 1-2 percent annually and review their investment portfolio every year. 
  5. Don’t withdraw your retirement savings. One of the biggest factors that undermine consumers’ ability to reach their retirement savings goals are cash-outs, loans and withdrawals. Gen X and Y can avoid this pitfall by ensuring the money they have saved for retirement remains set aside for retirement. Plan cash-outs or withdrawals can have a significant impact on whether Gen X and Y consumers achieve their retirement savings goals. 

“Although retirement is likely decades away for Gen X and Y workers, it is critical that they understand how the financial decisions they make today will affect their retirement lifestyle,” noted Salka. “Our research shows that fewer than half of Gen X and only a third of Gen Y believe saving for retirement is a top priority. If younger Americans start saving just a few years earlier, it can have a significant impact on their retirement security. 

The study is based on a LIMRA survey conducted in May 2012. Additional results were based on LIMRA analysis of the U.S. Census Bureau’s Current Population Survey March 2012 Supplement and the Federal Reserve Board’s 2010 Survey of Consumer Finances.

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LIMRA Contacts:

Catherine Theroux, 860-285-7787, ctheroux@limra.com.

About LIMRA

LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.