Americans love instant gratification. That's why so many are in credit card debt (more on that in a future post) and that's why so many save so little (see our previous article on Americans' Negative Savings Rate).

This preference for devoting resources to the present rather than the future apparently starts young.

According to a study released by the Government Accountability Office (GAO) in December 2007, 36.8 percent of workers who are 17 years old now will have absolutely no money in a 401(k) or similar retirement plan when the time comes for them to retire.

According to a CNN article on the study, "Only 36 percent of workers in 2004 participated in 401(k)s and similar accounts when offered."

With Social Security up in the air and pensions becoming increasingly rare, workers are basically left to plan their retirement on their own by contributing to a 401(k), IRA or both. There are even self-directed IRAs and self-directed 401(k)s for those who want to really take the reins of planning for their retirement.

Unfortunately, it seems that many workers are paralyzed by the idea of planning for their retirement. So, rather than face the stress of the decision-making process, so they do nothing about it. And hope for the best, I guess.

"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," according to CNN. "Automatic enrollment would halve the number of low income workers with zero retirement dollars from 63 percent to 30 percent."

The GAO is not the only one reporting on the trend. The Employee Benefit Research Institute (EBRI) released a report last November that found that participation in employment-based retirement plans decreased from 40.9 percent of all workers in 2005 to 39.7 percent of all workers in 2006.

"The EBRI report found certain characteristics were associated with a lower level of participation in a retirement plan, such as being non-white, younger, female, never married, having a lower educational attainment, lower earnings, poorer health status, no health insurance through an employer, not working full time, not working full year, and working in service occupations or in farming, fisheries and forestry occupations," according to The Wenatchee World.

The bottom line, though, is that everyone needs to plan ahead and save for retirement. Not only do they need to save, they need to invest in such a way as to outpace inflation. Otherwise, they won't have any money when they want to retire. Hoping to win the lottery at age 64, for example, is just bad "strategery."

Labels: Personal Finance, Retirement Planning, Workforce, Young Workers

There may be a reason why so many victims of scams seem to be older adults: Researchers have found that decision making ability decreases with age, according to the New York Times. The study, led by Natalie L. Denburg of the University of Iowa, appeared in the Annals of the New York Academy of Sciences.

Test subjects were divided into two groups, one of 26- to 55-year-olds and one of 56- to 85-year-olds. "The goal was to see how well the older volunteers used the skills often demanded of them when making decisions in real life about activities like investments, insurance and estate planning," according to the New York Times.

The study "used a gambling-style test in which people draw from four different decks of cards. Two decks, not to mince words, are for suckers," according to the New York Times. "They give short-term rewards but long-term losses. The other two decks do the opposite. Most people draw a lot from the bad decks first and switch. In the study, many of the older participants stuck with the bad decks."

The study attributed the decreased ability aging adults have to make good decisions to changes in the prefrontal part of the brain that influences behavior.

Those who are approaching retirement or are already retired are perhaps the investors who need to be making the best investment decisions simply because they have less time to recover from mistakes. And, just like the older adults in the study, perhaps older investors would be content to stick with the short-term rewards.

Investors of all ages who seek out immediate and/or large returns are susceptible to falling victim to scams. But older adults, making less sound decisions than in their youth, may be especially likely to become victims of scams. There are plenty of stories of older adults who put all of their money into one investment only to lose it all. Older investors, and investors of all ages, should remember to not put all their eggs in one basket, just in case one of their investments falls through.

Labels: Baby Boomers, Personal Finance