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MSN Money posted a story this week with some "alarming" research about young adults and retirement plans: surprise, surprise, we aren't all using them.
Young adults all but ignore 401(k)s, IRAs (via AllFinancialMatters)
Several recent studies say the vast majority of young workers are failing to sign up for myriad tax-advantaged accounts, potentially leaving hundreds if not thousands of dollars of benefits on the table.
Though the vast majority of eligible baby boomers participate in their 401(k)s, less than a third of workers 25 and under are contributing to these employer sponsored retirement plans.
I get it. And I agree — we young folks should be starting to save as early as possible and taking advantage of compound interest and employer matches. Absolutely.
But apparently doing what we can isn't enough.
Even worse, only 4% of young workers are maxing out their workplace retirement plans, according to a recent survey by the tax information service CCH.
What?!
Do these people honestly expect me to fill up my 401(k) with the maximum $15,500 limit? That's just impossible.
According to the study mentioned, "young taxpayers" (aka "young workers") are between 18-24. Let's take a look at the average salary of a "young worker," thanks to PayScale.
Median Salary by Age - Country: United States (United States)
Hmm. An average salary of $38,454 before taxes. Drop it down by $15,500 for your 401k — $22,954. Call it $17k after taxes.
That's $1,400 a month to spend on everything — rent, food, bills, school loans and more.
That's less than I pay per month in rent.
I agree with the general point of the article — young adults should be doing more to save. But the emphasis should be that every bit counts and not that it's all or nothing. That's not the right way to frame the discussion at all.
What do you think?
