Americans are “somewhat challenged” in having a secure retirement, one expert said recently on Yahoo Finance.
“There’s a big mismatch between savings and safety,” Fredrik Axsater, head of institutional client group at Wells Fargo Asset Management, told YFI PM recently (video above).
He noted that members of Generation X have saved only $66,000 for their golden years, even though they believe they will need $750,000 for a comfortable retirement. That’s “11 times more,” he said. (Pew Research defines Generation X as those born between 1965 and 1980.)
Millennials only have $10,000 saved for retirement, while Gen Zers have $2,000, according to Wells Fargo’s latest 2019 Retirement Study.
The problem is younger generations are increasingly on the hook to fund their own retirement. Only 5% of current retirees depend on a 401(k) or IRA as a primary source of retirement income, according to the Wells Fargo survey.
But 41% of Gen X, 45% of millenials, and 44% of Gen Z expect those retirement accounts to be the main source of their income in their retirement years.
That means younger Americans need to get in a “planning mindset,” Axsater said, and try to put away at least 15% of their income into retirement accounts.
‘Start by doing something’
American workers with access to 401(k) plans sock away 8.8% of their income on average, according to a second-quarter report from Fidelity. That doesn’t count any contributions an employer makes on a worker’s behalf.
And more millennials are opening up traditional or Roth IRAs. The share of IRAs owned by millennials at the end of the second quarter increased 20% versus the same period last year, Fidelity found.
But financial challenges, especially student loan debt, has made it harder for many Americans to save as much as they would like.
Three in 5 millennials and a quarter of Gen X and Z reported they have an “unmanageable amount of debt,” according to Wells Fargo’s survey.
Axsater’s advice is to stay focused.
“Start by doing something,” he said, “[to] make sure you don’t get overwhelmed by financial matters.”
Dhara is a writer for Yahoo Finance. Follow her on Twitter @dsinghx.