In a survey by Charles Schwab & Co. of 500 people aged between 25 and 40 found that, asked what they will do with their tax refund, 58% of people in this age group plan to use it to pay off debt, 59% plan to use the refund for other uses, and only 16% plan to use their tax refund to invest in an IRA or other retirement account.

Funding an IRA might become more attractive to those in this age group since the Pension Protection Act gives taxpayers the ability to directly invest all or a portion of their refund into an IRA, an option that appears on forms for the 2006 tax year.

Although most Gen Xers say they taking some action to save for retirement (80%), only 40% of those who are saving have an IRA. Of those who are not investing in an IRA, they say they don’t need one, don’t have enough money to fund one, or believe the accounts are too complicated (Schwab recently unveiled a “15-minute IRA).

Make It Simple

Those in Generation X do not appear confident in their investment choices, however nearly half (44%) of those who do not currently fund an IRA said they would be more likely to invest in an IRA if there was a one-time investment choice, according to a Schwab press release. That perspective was shared almost equally between current IRA/401(k) investors (50%) and non-investors (39%). However, 20% of those in Generation X say they don’t know how an IRA works, or even what it is.

“Gen-X’ers are facing a range of financial challenges – from paying off college debt to making mortgage payments to saving for their families,” said Rande Spiegelman, vice president of financial planning for the Schwab Center for Investment Research, in a news release. “What we are seeing in these results is that competing spending priorities are impacting their ability to save for retirement. But with a few minor adjustments, younger investors can make the necessary changes to ensure they are doing everything they can to save for the future.”