A Generation Gap in Retirement Planning

Young retirement savers are disregarding frugality and chasing investment returns, survey shows.

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Almost everyone aims to attain financial security in retirement. But each succeeding generation expects to be more self-reliant than the preceding one, according to a new online survey by Charles Schwab, Age Wave, and Harris Interactive. Americans are depending more on personal savings and investments and less on the government or their employer.

Current retirees depend on the traditional three-legged stool: Social Security, pensions, and personal savings and investments. Each leg supports their retirement to a substantial degree. But generations X and Y expect to rely largely on their own investments, the survey shows.

Survey participants were asked: "Approximately what percentage of your retirement funds will come from the following sources?" Here is how various age groups responded:

Age group Social
Security
Employer
pension
Personal
savings/
investments
Silent generation (ages 63-83) 41% 27% 32%
Baby boomers (44-62) 35 23 42
Generation X (32-43) 27 20 53
Generation Y (21-31) 19 20 61

The generations also differ on the path to financial security. Members of the frugal "silent generation" stress living within your means, while generations X and Y emphasize investing wisely.

Survey respondents said the average person will need to have $500,000 to live comfortably in retirement. The median net worth of those in the 55-to-64 age group is only about half that ($249,000), according to the most recent Federal Reserve Survey of Consumer Finances. And all other age groups had a far lower net worth.

Tell us, what's the best path to a secure retirement: frugality or solid investments?