When it comes to retirement planning, Generations X and Y appear to be learning learned from the mistakes of their elders. The younger Generation Z, though -- not so much.
Survey findings released by TD Ameritrade show nearly 60 percent of Gen X and Gen Y make regular, automatic contributions toward their retirement savings, compared with 46 percent of non-retired Baby Boomers. And when it comes to getting a jump on their nest egg, younger generations are eager to get started; both Gen X and Gen Y started saving for retirement, on average, in their mid- to late-twenties. That's nearly a decade earlier than Baby Boomers who, on average, started saving at age 35.
"For even the most sophisticated investor, retirement planning can be a tough concept to grasp," said Carrie Braxdale, managing director, investor services, TD Ameritrade. "Gen X and Y have accepted the reality of the past few years, and rather than being discouraged, they are using what they've witnessed to their advantage by saving earlier and regularly. The hope is that tomorrow's investors -- Gen Z -- follow suit as they near retirement."
Gen Z naivety
For the teens and young adults of Generation Z (ages 13-22) who have grown up in households that struggled through the recession, the question remains as to whether they have been tainted by the gloom and doom or driven to be better.
According to the survey, Gen Z generally understands the importance of saving money -- over half said they have a savings account -- thanks to the influence of early conversations about money with their parents. But, those conversations have largely been about saving in general or saving for college rather than preparing for retirement. Just eight percent of Gen Z reported they are currently saving money for their "golden years."
In fact, many Gen Z savers have a very different outlook on retirement saving strategies and timing when compared with their parents:
Just 35 percent of Gen Z respondents believe they will not be able to count on Social Security when they retire, and therefore should save money for themselves, compared with 61 percent of parents who reported the same.
Nearly 40 percent of Gen Z respondents believe they will have an inheritance, and therefore don't need to worry about saving for retirement, versus just 16 percent of parents who reported that they believed the same for their Gen Z children.
Forty-three percent of Gen Z respondents believe that you can never start saving too early for retirement, compared with 71 percent of parents who reported the same.
"The good news is that Gen Z is starting off with a good understanding of the importance of saving," said Braxdale. "But that doesn't mean they should wait to become more educated on proper long-term savings habits. We encourage parents to talk to kids specifically about retirement savings to ensure they understand the importance of getting a head start and taking advantage of the power of compounding."