Gen X/Y building wealth more slowly than their parents

Dollar bills in a bird's nest

As a member of the under-40 crowd, I'm concerned about my retirement, and it's not for lack of saving.

A new study from the Urban Institute — a Washington, D.C.-based think tank — finds that we (members of Gen X and Y) have accrued less wealth than our parents had at the same age.

In fact, our average wealth in 2010 was 7% below that of people in their 20s and 30s in 1983, according to the study (www.urban.org/UploadedPDF/412766-Lost-Generations-Wealth-Building-Among-Young-Americans.pdf).

That's despite the fact that the average household wealth of Americans approximately doubled from 1983 to 2010.

In other words, even though wealth is growing overall in America, the younger generations are lagging behind.

It's nerve-racking, especially since each generation is typically wealthier than the previous generation at any given age.

For example, the study notes that people born from 1943 to 1951 are wealthier than those born from 1934 to 1942, who are in turn wealthier than those born from 1925 to 1933.

But that pattern has stopped.

Short of looking for dropped pennies in the parking lot, I'm saving as much as possible, and many of my peers are doing the same.

So, what gives?

According to the Urban Institute, there are several factors contributing to our inability to boost our net worth.

One of the biggest problems is that the younger crowd has lost ground to a harsh job market.

Unemployment is currently 13.1% for those 20 to 24 years of age and 7.8% for those 25 to 34.

Those who do have a job are typically seeing stagnant wages, the study notes.

The housing market crash also hit us pretty hard.

Many of us with a mortgage are underwater without the ability to take advantage of today's low mortgage rates, because current credit standards are stricter.

And let's not forget the mounds of student loan debt we've racked up.

According to a Pew Research study of Federal Reserve data, 34% of young households had outstanding student loan debt in 2007, and it increased to 40% in 2010.

The median amount of student loan debt owed in 2010 was $13,410.

So, what can we do about this?

The authors of the Urban Institute study say that new or reformed government policies could improve the outlook for younger generations.

That includes policies on education, pensions and the subsidy system for new homeowners.

But I was curious about what we can do now to boost financial security.

So I chatted with Nevin Adams, director of the American Savings Education Council, to get his take.

"Probably the first (and best) thing younger workers can do is to sign up to participate in their workplace retirement plan, such as a 401(k)," says Adams.

Bryan and Katie Phelps

Success Story: How one couple saved $175,000 before turning 30. Bryan Phelps wasn't much of a saver until he married Katie and started listening to podcasts on his way to work and reading finance books in his spare time. The more he learned, the more he enjoyed watching their investments grow. "It made me question every small purchase, even a drink or candy bar," he says. "I probably drove my wife a little bit nuts."

Many plans now provide automatic enrollment, and all we have to do is not opt out — seriously, just don't opt out.

Of course, it's also important to make sure you're getting at least the company match on your 401(k).

"If your employer will contribute 50 cents to your account for every dollar you put in, you should put in enough to get every bit of that match — otherwise you’re just leaving money on the table," says Adams.

He says to slowly increase the savings rate by 1% or 2% each year.

"It adds up quickly, and you probably won't even feel the loss of that extra percent in your take-home pay," he adds.

The Saver's Credit is one more way to sock away some cash.

Younger workers tend to have smaller paychecks to draw from, Adams notes, but Uncle Sam will actually give you a tax credit for saving, if you meet the income requirements (www.irs.gov/uac/Newsroom/Take-Credit-for-Your-Retirement).

And we have to acknowledge the fact that we need help from experienced financial advisers, especially in the midst of record-low rates and a recovering economy.

Because many of us lack pensions, are saddled with student loan debt and are underwater on our homes, we have to fight even harder to save more.

I'll be attempting to stuff more in my IRA and 401(k) to try and catch up, even though it'll hurt a bit.

How about you? What do you think is the solution?

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