Wednesday, April 4, 2012

Up to 50% of Americans are making this retirement mistake

More than half of people under 50 did not make retirement contributions last year, according to a recent report. There's only one excuse for not contributing -- and most people can't use it.

By Joshua Brown, contributor

FORTUNE -- Very little in life is truly free. Free information (think seminars, webinars) requires your time, free "gifts" require you to be obliged to the giver. Because this is the case, when something truly free comes along, you take it.

There's a highly disturbing survey out from T. Rowe Price that looks into the investing habits of Generations X and Y circa now. It seems many Americans who still have decades of work ahead of them have decided that lowering their taxable income is not cool anymore and investing for the future is lame.

Too bad, because they're obviously committing one of the cardinal sins of business: Saying no to the freebies. You'd think this would be obvious, and yet according to T. Rowe's data, only 45% of people between 21 and 34 (Gen Y) and people between 35 and 50 (Gen X) will be making IRA contributions for fiscal 2011. That means a whopping percentage - more than half - will simply do nothing. This is down considerably from 2010, when 71% of those surveyed made contributions to their retirement plans.

This is unacceptable. When I speak with young investors (which many of my readers are), the first thing I tell them to do is contribute the maximum to their 401(k)s or 403(b)s - this before anything else. And if they are not at an employer with a plan, then establishing and contributing to an IRA is the next best option. What they do with the investing of that money is their choice but by not losing it to taxes, they're ahead of the game. (more)

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