The following was written by Margarida Correia and posted here on February 5, 2013

How many Gen X and Gen Y consumers are saving for retirement? Not nearly enough, according to LIMRA, an industry-funded research group.

In a new report, titled “Sowing the Seeds for Retirement: Gen X and Gen Y Markets,” LIMRA finds that younger investors are not giving retirement the attention it deserves. Less than half of Gen X consumers (46%) selected retirement as their top reason for saving, with vacation and travel the top choice for 38%. Younger Gen Y consumers were even more delinquent, selecting vacations over retirement as the single most important reason to save. More than four in 10 Gen Y investors (41%) cited traveling as the biggest motivating factor compared with 31% who were saving primarily for retirement.

LIMRA sounded warning bells for younger generations of Americans who have to rely primarily on their savings to fund their retirement as traditional pension plans for these demographics groups disappear. LIMRA estimates that only 16% of the 116 million Gen X and Gen Y consumers in the U.S. have defined benefit retirement plans.

“Unfortunately, without guidance, the financial harvest ahead of these generations may not be as bountiful as they expect. Despite their current confidence in obtaining their desired retirement lifestyles, most Gen X and Gen Y consumers have not achieved even modest savings levels,” LIMRA writes in the report.

LIMRA bemoaned the fact that younger investors are not maximizing their contribution to 401(k) retirement plans and in many cases missing out on company matches. The median deferral rate is 6% for both Gen X and Gen Y consumers, according to the report.

Women especially need to be encouraged to save more than their male counterparts to compensate for the likelihood of extended longevity and fewer working years, LIMRA said. Only 43% of Gen X women and 27% of Gen Y women listed retirement as one of the top three reasons for saving, lower than levels registered for Gen X and Gen Y consumers overall (46% and 31%, respectively).

LIMRA pointed out that Gen X and especially Gen Y consumers are conservative investors, making them ideal customers for risk management products targeted at retirement. Nearly half of Gen Y consumers (47%) have little or no tolerance for investment risk, with Gen Y women being especially risk averse.

The report is based on a study conducted in May 2012 that polled 5,296 Americans ages 20 to 84. Of the people surveyed, 884 respondents were Gen X and 720 were Gen Y.

Margarida Correia is Associate Editor for Bank Investment Consultant, a SourceMedia publication.