Photo: Flickr / neotint
Young adults just can’t seem to catch a break. According to T. Rowe Price, 55 per cent of Generation X and Y investors—defined as ages 35-50 and 21-34, respectively—don’t plan to do a thing with their IRA and/or aren’t sure whether they want to.
Contrast that with last year when 71 per cent of these investors made a contribution for the 2010 tax year.
A mix of factors—feeling too poor (32 per cent), market volatility (14 per cent) and job uncertainty (12 per cent)—played a role, but debt was probably the biggest issue, with 56 per cent of respondents saying they’d prefer to sock their cash in a rainy day fund or pay off their bills instead. (See the best and worst places to hide your emergency cash.)
“Given their economic fears, it is understandable why many younger investors might be unable or unwilling to fund all of their tax-advantaged accounts and are focusing primarily on their 401(k) during this tax season,” said Stuart L. Ritter, CFP and senior financial planner for T. Rowe Price.
But young investors are missing out, as their greatest asset is time.
Per Your Money contributor Wealthfront: “The power of compounding mean your dollars are twice as powerful in your 20s as your 30s.
If you invest $2,000 a month starting at age 20 to withdraw when you’re 60, and earn a conservative 4%, you end up with $1.4 million. If you wait until you are 30 to start, you’ll end up with $670,000.”