Younger investors aren’t contributing to individual retirement accounts
, despite evidence indicating they are in the position to benefit from long-term retirement savings.
A new T. Rowe Price study found just 45 percent of younger investors plan to contribute to an IRA for the 2011 tax year. Another 55 percent said they do not plan to fund an IRA or are insure whether they will for this tax season. This is a significant decrease from 2010 when 71 percent of young investors
contributed to an IRA.
When asked what they would do with an extra $5,000, younger investors said they would pay off debt or add to their “rainy day” fund. Just 16 percent said they would contribute to an IRA.
The decline in investors from Generation X
and Generation Y (ages 35-50 and 21-34, respectively) contributing to IRAs is driven by several factors, according to the survey:
- A belief that current participation in a 401(k) plan is adequate for now (42 percent)
- A feeling that they can't afford it (32 percent)
- Economic uncertainty (23 percent)
- Market volatility (14 percent)
- Job uncertainty (12 percent)
In addition, the survey indicated that younger investors have lost faith in the stock market. Just 22 percent of Generation X and Generation Y
investors report confidence in the financial markets going into 2012.