Fewer than half of Generation X and Generation Y investors have made saving for retirement their top priority and a majority have little understanding of financial products and services, according to LIMRA research.

“There are nearly 116 million Americans aged 20 to 47, and most of them will have to rely solely on their savings to fund their retirement,” said Alison Salka, corporate VP and director of LIMRA Retirement Research. “Yet our research indicates that few of these consumers are taking full advantage of the retirement savings vehicles available to them. Fewer than half of Gen X and only a third of Gen Y believe saving for retirement is a top priority. If younger Americans start saving just a few years earlier, it can have a significant impact on their retirement security.”

LIMRAs five suggestions to improve your chances of building a secure retirement:

  1. Improve financial knowledge – 60 percent of Gen X and 54 percent of Gen Y have little-to-no knowledge about financial products and services. Once they learn about available options, they can make better decisions about investments and savings habits.
  2. Get Help – People who work with an advisor are more likely to contribute to a retirement plan (78 percent vs. 43 percent); they are more likely to save at a higher rate (61 percent vs. 38 percent) and feel more confident about their retirement prospects (71 percent vs. 43 percent).  LIMRA found Gen X and Y consumers have little tolerance for investment risk, yet to achieve growth and reach their long-term financial goals now is the time to have a more aggressive portfolio. Those who work with financial professionals have higher risk tolerances.
  3. Participate in employer-sponsored retirement savings plan or start an IRA – Enroll in a retirement plan or establish an IRA to take advantage of tax-deferred savings and matching contributions.  LIMRA found 56 percent of Americans ages 18-to-34 are not currently contributing to a retirement plan. Defined contribution plans will be a major source of savings for Gen X and Y consumers. For the 75 percent of Gen X and Gen Y consumers with access to a DC plan and employer-matching contributions, not taking part is leaving free money on the table.
  4. Steadily increase contributions – Take advantage of the automatic contribution escalation and automatic asset rebalancing. If your plan doesn’t offer these features, increase your contribution rate 1-2 percent annually and review your investment portfolio every year.
  5. Don’t withdraw your retirement savings – Cash-outs and withdrawals undermine consumers’ ability to reach their retirement savings goals. Avoid this pitfall by ensuring the money remains set aside for retirement.  

The LIMRA study was conducted in May, and additional results were based on LIMRA analysis of the “U.S. Census Bureau’s Current Population Survey March 2012 Supplement,” and the Federal Reserve Board’s 2010 Survey of Consumer Finances.