Study: Too many teens will have nothing in 401(k)s

WASHINGTON – Teenagers flipping burgers, stocking shelves or studying for finals don’t think about their retirement. The government does, however, and the prognosis isn’t good.

More than one out of every three American workers born in 1990 will have zero dollars in a 401(k)-style plan at retirement, a government report said Tuesday, an ominous sign considering many businesses are dumping pension plans.

The GAO report estimated 36.8 percent of today’s 17-year-olds will have no money in a 401(k) or similar plan when they retire. The numbers will be worse for low-income workers: 63 percent of them will have zero dollars in a 401(k)-type account when it comes time for them to retire.

With the reduction of pension plans and the uncertainty of Social Security, that number means millions of Americans will face rough going when it comes time for today’s teenagers to retire, lawmakers said.

“Today’s workers will more likely struggle to make ends meet during retirement than previous generations,” said Rep. George Miller, D-Calif.

Part of the problem is that people withdraw part or all of their retirement savings, the GAO said, and they don’t participate in retirement plans when they’re offered. Only 36 percent of workers in 2004 participated in 401(k)s and similar accounts when offered, the most recent data available, according to the report.

Making it automatic is key because people freeze up when left on their own, said David John, a retirement expert at the Heritage Foundation.

“They know that this is a really important decision and that if they don’t make the right choice, they can look back and really regret it when they reach retirement age,” John said. “And what they do, like so many of us who are faced with that, they’re paralyzed, inertia takes over, they don’t do something.”

GAO found that automatically enrolling workers in 401(k)s and similar plans would cut the number of those without money in those plans to 17.7 percent. Automatic enrollment would halve the number of low-income workers with zero retirement dollars from 63 percent to 30 percent.