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Retirement advisers say it is never too early to start saving, but life tends to get in the way. “The minute you have a paying job, it’s a good idea to start thinking about retirement,” says Gerri Walsh, senior vice-president for investor education at the Financial Industry Regulatory Authority.

“One of the best ways to invest is a company-sponsored retirement plan like a 401(k). That’s a great way for younger people to get started.”

Contributions into these schemes are not taxed but when an individual eventually takes money out of the 401(k) account, these withdrawals become liable for tax.

The average employee contribution rate was 8.8 per cent of salary in the first quarter of 2019, according to a report by Fidelity Investments. The average employer contribution rate was 4.7 per cent in the same period.

In total, $5.8tn was held in 401(k) plans as of June, according to the Investment Company Institute, an industry body. Workers in their 40s with more than two to five years’ service at a company had an average account balance of $38,000 in 2017. The account size for staff in their 60s, with more than 30 years tenure, was $287,000.

For many in the US, however, the prospect of a well-funded retirement is bleak. More than one in five American adults have less than $5,000 saved for retirement and 15 per cent have no retirement savings at all, according to a study by financial services company Northwestern Mutual.

Perhaps even more troubling is the survey’s finding that nearly a third of American adults are within three pay cheques of needing to either borrow money or skip paying one or more bills, and 15 per cent of adults expect to be in debt for the rest of their lives.

The lack of financial security of a significant proportion of Americans does not surprise Ms Walsh.

“People have financial challenges that often keep them from participating in saving or investing for their future,” she says.

The challenges vary depending on the age group, according to advisers.

Some millennials — in the 23 to 38 age group — may not have enough income, planning skills or motivation to save, while still struggling with student loan payments.

FT 401 adviser Teri O’Connor, founder and senior corporate retirement adviser at Altus Consulting Group, says she tries to be creative when encouraging millennials to save. She uses a face-ageing app, for example, to show millennials how they may look when they turn 70. The visual helps because millennials have a hard time imagining getting to retirement age, Ms O’Connor says. “I tell them: ‘You’re not saving for you today; you’re saving for that person in the picture’.”

Many people in generation X — now aged 39 to 54 — are not saving or investing as much as they should.

The Northwestern Mutual survey shows American adults have an average of $29,800 personal debt, excluding mortgages. Gen-Xers owe more than that — an average of $36,000.

Ms Walsh calls Gen-Xers the “sandwich” generation. “Many of them have ageing parents with health issues that require their time, attention and money, but they also have children who are likely to be still financially dependent,” Ms Walsh says.

“They’re straddling that generational bridge while trying to make ends meet themselves.”

Many Gen-Xers refuse to put themselves first, especially when it is a choice between their financial security and their children’s wellbeing, Ms O’Connor says.

“I tell them all the time: ‘Your kids can borrow money for houses, cars, weddings and college, but you can’t borrow money for your retirement’,” she says.

“But they’re still sacrificing their retirement for their kids. It’s hard to convince them otherwise.”

Ms O’Connor uses the analogy of an aviation emergency to make her point. “When the oxygen masks drop, you’ve got to put it on yourself first and then your child. You’re no good to anybody if you die.”

Not surprisingly, it is the baby boomers — those aged 55 to 72 who are either retired or near retirement — that are most concerned about health problems and healthcare costs, says FT 401 adviser Barbara Delaney, principal at Stone Street Renaissance.

“For many boomers, healthcare concerns are driving the decision to delay retirement,” she says.

The hope is for more people to start planning for retirement as soon as possible and have the discipline to save and invest, she says.

“Setting aside money for your retirement just needs to be part of your everyday life, your overall budgeting and cash flow management,” according to Ms Delaney.

“You can’t spend more than you make, don’t get yourself in a hole by taking on extra credit cards, try to consolidate the debt that you have or pay off your higher-interest debt.”

For individuals who have managed to set aside a sizeable amount in their 401(k), the advisers have the same advice — keep the money where it is.

“Don’t get tempted by this money,” Ms O’Connor says. “Don’t borrow against it or cash it out, especially if you’re just planning to spend it on something silly that will be of no use to you when you retire.”

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About this Special Report

In this report, we have the full listing of this year’s leading FT 401 advisers, state by state. Plus: why Americans face huge generational gap on retirement savings; millennials force industry to adapt new investment trends; SEC sparks debate over ‘ugly’ IRA rollovers; and top advisers squeeze smaller rivals

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