Melissa Miles, 28, isn’t saving for retirement. In fact, she cashed out her 401(k) retirement-savings account in 2008 to move to Colorado and go to college after working five years in the investment industry.
“The stock market is a crap shoot. I had things I wanted to do with my money . . . which is better than saving for an iffy better future,” said Miles, who’s still in school and works part time as an office assistant.
Not everyone is as extreme as Miles, but many younger workers feel that building a traditional nest egg of primarily stock investments is for the birds — at least for now. Financial planners say it’s a risky approach but they’re seeing more of it among “Millennials,” who range in age from about 16 to 31.
Indeed, the options for those looking to grow monthly savings into the hundreds of thousands of dollars required for a comfortable retirement appear particularly dismal these days. The Dow Jones industrial average still hasn’t recovered from the losses of 2008. Meanwhile, certificates of deposit and other interest-paying investments are returning less than the rate of inflation.
“In an environment like this, getting consistent returns out of the market is difficult,” said Jim Pasztor, a financial planner in Aurora and associate professor at the Greenwood Village- based College for Financial Planning. “There needs to be more of an understanding of how investing for the long term works, because losses do occur in the short run.”
Hits just keep coming
For “Generation X,” roughly ages 32 to 46, planning for retirement is a higher priority. But they’re staggering from hits in the stock, housing and job markets as they enter what should be their prime earning and saving years.
“It seems like we’re never going to catch up,” said Lori Osenbaugh, 38, of Lakewood, who earns less as a tech-support worker today than she did in the late 1990s. She and her husband liquidated their 401(k)s in 2006 after a series of setbacks that included layoffs.
“We’re in this loop of never quite getting there,” she said.
A recent survey by the Employee Benefit Research Institute found that 56 percent of workers have less than $25,000 in savings and investments, and 29 percent have less than $1,000. The Denver-based National Endowment for Financial Education said that many employers stopped offering matching funds for 401(k) plans during the recession, prompting some employees to stop contributing — but the trend has since reversed.
One factor keeping some younger and middle-aged workers from saving for retirement is supporting their children. In a 2010 Sallie Mae study, families with children likely to attend college ranked saving for education as high a priority as putting away for retirement. Twenty percent said saving for their kids’ education was their top saving priority.
For some, retirement savings are the government’s responsibility.
“I do not have a retirement plan. I will not get a retirement plan,” said Christina Bogle, 44, who runs a medical-marijuana dispensary with her husband in Penrose. “I believe if our government can bail out everything they’ve bailed out in the past, they can definitely bail out Social Security. The government is going to do the right thing when the time comes.”
Bogle said she can live on Social Security payments alone because she keeps her costs low and has little debt.
“They shouldn’t be scaring our age group right now. We didn’t really understand about the 401(k)s. Had we known I would have started one at 25,” she said.
Uncertainty prevails
Josh Petre, 25, isn’t counting on anyone, including the federal government, to fund his golden years. He estimates he’ll need $1 million to retire in four decades, or monthly savings of $200 to $300.
Though he’s still working on a bachelor’s degree in political science at Metropolitan State College of Denver with an eye toward law school, Petre recently started tucking away about $40 a month from his job waiting tables at his uncle’s restaurant in Evergreen. He’s putting the money in a Roth IRA that’s returning below 1 percent.
“The real disheartening thing is calculating what I’m getting from saving and then calculating inflation,” he said. “I’m saving but I’m still losing money.”
An April survey by Boston-based MFS Investment Management found that Generation X and Y investors had a smaller share of their portfolios in equities and more in cash than baby boomers and those age 65 and above — a flip from the traditional advice that younger investors should be more aggressive. Sixty-one percent said they were more concerned than ever about being able to retire when they want.
Pasztor said young investors should prepare for uncertainty.
“People don’t keep jobs as long as they used to. That means you have to approach your finances as though unexpected things can happen,” he said. “Don’t over-leverage yourself, don’t live check to check. With all that uncertainty, you should be saving, and you should be saving some for retirement.”
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
Three ways to maximize your savings
• Sign up for your employer’s retirement plan and make small, regular contributions. The funds will be taken directly from your paycheck before you have a chance to spend the money.
• If you already save regularly, increase the amount you withhold from each paycheck. Aim for at least 10 percent of your salary.
• Learn more about strategies for those who have started saving late with National Endowment for Financial Education’s “Guidebook to Help Late Savers Prepare for Retirement,” found online at .
Source: National Endowment for Financial Education
