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Young Adults Concerned about Retirement

July 30, 2010 — Adults aged 25 to 34 are already concerned about having enough money to see them through retirement, according to research conducted by market-research company Ipsos. Likely in response to these concerns, the research also suggests that this generation will be particularly receptive to alternative contribution options within employer-sponsored 401(k) plans.

71% of adults ages 25 to 34 have less than $50,000 in investable assets overall, and among those who have a 401(k), 9 in 10 have less than $50,000 invested in it. With an expectation that they will be retired for 23 years on average, 37% of young adults think it is unlikely they will even be able to cover basic monthly expenses throughout retirement. 25% feels that they have enough information and resources to help them plan for retirement.

Young adults also are interested in alternative approaches to investing for retirement. To gauge consumer receptivity toward certain changes, Ipsos had survey participants evaluate two potential investment alternatives: annuity and exchange-traded fund (ETF) options for 401(k) plan contributions. In both cases, results demonstrated that younger adults are more likely to be receptive to these investment alternatives.

For the annuity option, 83% of young adults said they would like it, versus 74% of adults across all age groups. 48% of young adults said they would be likely to seek more information about this option. Among current 401(k) participants, 36% said they would allocate a portion of their contribution to an annuity if available. The research also suggests that an annuity option would increase 401(k) participation among the 56% of young adults who do not currently participate in a 401(k). Among those not current contributing to a 401(k), 47% said they would be more likely to participate if it included an annuity option.

Younger adults also demonstrated receptivity toward the ETF option, although to a lesser degree, likely due to lack of clarity about the offering. Despite limited understanding, 35% of respondents said they would like the ETF option compared to 23% of adults across all age groups.

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