Young households hit hardest by the recession


CLARKONOMICS: The Great Recession was brutal to 35-44 year olds. So how do you rebuild? I’ve got advice for you.

New data from the U.S. Census Bureau show that so-called young households lost roughly 60% of net worth from 2005 to 2010. By comparison, the average family lost roughly a third of its household wealth.

Meanwhile, I also saw a TD Ameritrade survey that found half of Americans are looking toward retirement with dread, instead of with hope, joy or anticipation. Americans are so worried they won’t be OK when they hit retirement.

Now, let me say this. Retirement is less than 150 years old as a concept. The idea of a government-provided old age fund or pension goes back to Germany in the 1870s. The idea that you’d put in your time and then have your latter years to just have fun soon spread across Western Europe, before eventually coming over to Canada and the U.S.

Prior to that, the basic notion was that you worked until you dropped dead or were too ill to go to work. That’s how human beings did it since the beginning.

The last couple of generations had Social Security and an employer pension, plus whatever money they saved. That provided for at least a decent standard of living. That’s what we saw for our parents and grandparents. But it won’t be there for us.

Today, pensions are gone. Just a few employers still offer them and they’re shadow of what they were. And Social Security won’t provide enough for comfort in retirement.

The only way to ensure your comfort in retirement is to start saving money today. A lot of people lost jobs and had to live off their retirement savings during the recession. The households in those key 35-44 earning years got hit hardest. For you to right the ship, it requires that you save money if at all possible in your life.

I recommend what I call the “penny at a time” program.

Maybe people feel there’s no money to save with. If you feel you couldn’t possibly do a 401(k) because there’s no room for any savings, I want you to start by saving just one percent.


Then, six months from now, bump your contribution up by just another one percent, and do it again in another six months. After five years of that, you’ll be saving 10% of your pay before any employer match!

But by doing it just one percent at time, you won’t notice the difference in your paycheck because it’s all little baby steps.

In five years, you’ll have saved a dime of what you make out of each dollar. After 10 years, you’ll have saved 20% of what you make. That’s before any employer match. Saving steadily as you go up the income ladder is how you get to look forward to retirement and not dread it.

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