Retirement (Photo credit: 401(K) 2013)  Nearly every week some think tank, lobbying group or financial service company reports what sad shape Americans are in, or think they are in, when it comes to retirement. This week, for example, AARP, the lobby for those 50 and up, released a collection of research reports showing that if current trends continue, the living standards of middle class retirees are in for a big decline. (The papers were produced in cooperation with reputable academics, but are being used by AARP as part of its campaign against any Social Security cuts, including a change in the way the annual cost of living benefits boost is calculated.) Meanwhile, financial advice firm HelloWallet was generating buzz (including on Forbes here and here) with a new report detailing how a quarter of folks have been “breaching” their retirement accounts and incurring tax penalties and fees that could have been avoided if they’d built up emergency funds first, instead of stuffing all their savings into 401(k)s. (For help with that, see 11 Ways To Tap Retirement Cash Early Without A Penalty.)  So this happy news subject line on an emailed pitch from Ogilvy Public Relations yesterday caught my eye: “Younger People Think They’re On Track For Retirement.” Turns out that in a survey of defined contribution plan participants conducted last October by State Street Global Advisors and the Boston Research Group, 82% of those under 25 said they were on track to have enough saved to meet their retirement goals. That compares with the 54% of those aged 35 to 44 and 63% of those 55 and older who described themselves as on track. The youngest workers were not only confident, but in some cases downright cocky: 17% rated themselves as “extremely knowledgeable” about financial matters, compared to the 9% of those aged 35 to 44 and 8% of those 55 and older who made that claim.  My professionally framed follow-up question to the Ogilvy man (“Are those kids smoking something?”) brought Fredrik Axsater, a Managing Director and head of Global Defined Contribution for SSgA, to the phone for a chat. On the one hand, he pointed out, thanks to the spread of automatic enrollment in 401(k)s, young workers (or at least those who have regular jobs with benefits) are getting an early start on retirement savings. Moreover, those in the survey (maybe as a result of seeing their own parents struggle during the Great Recession) said they were increasing saving outside of work too. On the other hand, Axsater acknowledged, these 20-somethings are socking away only a fraction of what they need to save if they’re to meet their stated goal of replacing 70% of their income in retirement. (Typically, automatic enrollment starts employees out saving 3% of their pay and may automatically escalate those contributions over time to 6%—still less than half what experts believe folks need to save.)  Indeed, the SSgA report says employers should be “somewhat skeptical” about young folks “self-assuredness” since they cash out their 401(k)s when they switch jobs more often than older folks do and a fourth of the young workers surveyed reported switching to a more conservative asset allocation (meaning fewer stocks) in the past year. (Standard allocation advice is to have a very high stock allocation at a young age; for a somewhat different, and I think smarter approach, read A Fighter Pilot’s View Of Age Based Asset Allocation.)  Still, if the young workers are more confident than they should be, is this just the hubris of youth? Or is it possible, as some critics of automatic enrollment have suggested, that the process, combined with automatic defaulting of workers into target date funds, may lull workers into a false sense of security? (For example, in an SEC commissioned survey, only 48% of workers who owned target date funds knew that the statement “a target date fund provides guaranteed income in retirement” was false.)  Axsater didn’t want to tackle that question directly. Instead, he said, he sees his survey’s findings as a “call to action” for employers to do even more with financial education. To a surprising degree, the younger participants were much more receptive to workplace education and prodding to save—particularly when delivered through social media—than were their elders. For example, 50% of those 25 and under, versus just 28% of all employees, said an “employer sponsored buddy-program” would be likely to get them to save more for retirement. (A savings buddy? As a boomer, I find that idea laughable, if not patronizingly offensive.) And 54% of the young workers said an employer created Facebook page or blog would be likely to encourage them to save, versus just 19% of all workers who thought they’d be influenced by a Facebook page, and 28% by a savings blog.  Yet for all their interest in a social media savings message, 50% of young workers (compared to 39% of all workers) said one approach that would likely work is: “Stop trying to communicate. Instead, automatically enroll me with a high enough savings rate so I don’t have to think about it.’’ Of course if employers did ramp 401(k) withholding up to that level, young workers might be shocked at how much it reduced their take home pay and find it hard to save outside their retirement accounts—which takes you right back to the HelloWallet identified problem of workers lacking emergency funds and draining their retirement accounts. Plus, let’s not forget the student debt many young workers carry or the fact that if the AARP has its way, these kids will be paying through the nose for the baby boomers’ retirement, too. Bottom line: To stay on track for retirement, Gen Y is going to have to run a marathon.  Follow Janet Novack on Twitter
In survey of 401(k) participants, young workers were far more confident than their elders that they’re saving enough for retirement and that they know a lot about finances.