When most people invest, it’s in the context of achieving faraway financial goals, the kind that seems so remote that viewing them would require special equipment — like a tricked-out Hubble telescope. For most Americans, the economic burdens of retirement seem lightyears away. Numerous studies show young adults and newly minted professionals are especially prone to shortsightedness in this regard.
   Only 42 percent of employees between the ages of 25 to 34 participate in 401(k) plans, according to Vanguard. Alarmingly, significant numbers of young adults don’t seem to be overly concerned about their retirement income. However, there are many reasons why they should be.
    Unlike life’s other big-ticket purchases, like a house or a car, banks don’t offer retirement financing — a fact which isn’t likely to change anytime soon. The reality is that young professionals will gradually age, and as they do, they’ll become retirees. But therein lays the problem. Young adults who don’t anticipate and aggressively save for distant financial needs like retirement are heading for trouble. Grinding poverty in old age isn’t exactly a cheery prospect, but unfortunately that’s the default life path for those who don’t actively plan against it. Because achieving financial security in old age is a lengthy, lifelong process, the work of planning and saving for it is best begun as young as possible.
    For younger generations, an inability to borrow retirement funds later in life is a problem, but by no means is it the only one they face. It’s not just a question of a roof overhead and three meals a day. The long-term impact of inflation and its ability to steadily erode the purchasing power of one’s life savings is a real wild card, but so too are taxes, rising life expectancies and the future trajectory of health care costs.
    Though students and young professionals might scoff at the enormity of the looming fiscal challenges before them from a youthful perspective, with recent advances in health care and rising life expectancies, many of them will be around to blow out the candles on their 100th birthday cakes.
    Economic realities have shifted in other ways, as well. For prior generations, the cost of maintaining a desirable quality of life in retirement was mostly subsidized by a combination of employer- and/or government- sponsored programs. Today, as retirees start spending as much as a third of their lives away from the work world, the government and private sectors have quietly begun to rethink their once affordable commitments. Though many of the workers who are nearing retirement today will receive much of the economic support they’ve been promised, there’s a growing certainty that today’s younger generations will have to be more self-reliant when it comes to planning and preparing for their financial futures.
    Outraged taxpayers and parents might angrily retort, “How could this possibly be?” Well, ironically enough, the answer has something to do with people — lots of them, in fact.

Next week, part six.

   For more information, contact Bryan Medlin at bpmedlin@money-101.com or view his website at www.money-101.com.