Gen Y struggles with lower pay and do-it-yourself retirement

Baby boomers fretting over their pensions should spare a thought for Constance DeCherney. Like many of her generation, the 27-year-old Web strategist at Planned Parenthood in New York has done little to prepare for retirement. While she became eligible for a 401(k) in 2005, DeCherney only began putting money into it last year. She now contributes 3 percent of her pay, though that's just half of what Planned Parenthood will match, and DeCherney doesn't know how the investments are performing. "Just the idea of [saving for retirement] feels overwhelming," she says. "My fear of doing something wrong, or not doing enough, sort of paralyzes me."

DeCherney is typical of America's so-called Generation Y, the twentysomethings who have entered the workforce in the past 10 years. Already saddled with student debts averaging almost $20,000, according to New York-based think tank Demos, Gen Y is in a tougher financial position than previous generations. The average salary for 25- to 34-year-olds, for instance, fell 19 percent over the last 30 years, after adjusting for inflation, to $35,100, Demos estimates. That's if they can get jobs: Unemployment among 19- to 24-year-olds stands at 15.3 percent vs. the overall rate of 9.5 percent, according to the Bureau of Labor Statistics. While many of their parents have guaranteed retirement income from being in a company-funded pension for part of their careers, Gen Y is "the first do-it-yourself retirement generation," says Catherine Collinson, president of the Transamerica Center for Retirement Studies in Los Angeles.