Short-term goals and financial independence take precedence over traditional tax-deferred retirement savings accounts for older Gen Yers, says Hearts & Wallets.

The Hingham, Mass.- based financial research firm surveyed Gen Yers who were born between 1982 and 1990. (The entire Gen Y group is usually defined as being born between the early 1980s and 2000; however, Hearts & Wallets does not survey people younger than 21.) This group's savings goals drive their preference for liquid investments, reflecting in a higher use of online brokerage accounts over defined contribution plans.

Seventy-four percent of affluent Gen Y, those with more than $100,000 in household assets, have assets in an online brokerage account versus 67 percent who have assets in a defined contribution plan, according to the survey.

Less than a quarter of Gen Yers surveyed owned mutual funds; just 30 percent of their assets were allocated to employer-sponsored retirement plans or IRAs; and about 40 percent of their assets were held in bank checking or savings accounts.

Desire for financial independence over a traditional retirement make retirement savings accounts less appealing, the study found. Also, the penalty-free access to capital and greater investment choices of online brokerage accounts attract this group.

“Gen Y could become more engaged with DC plans if the financial services industry promoted more qualified plan benefits beyond saving for retirement, like tax deferral,” said Chris J. Brown, principal of Hearts & Wallets. “Perks like tax deferral or applicable "free money" from an employer match can be very appealing.”

Three-quarters of Gen Y aren’t planning for traditional retirement, or to stop working all together. Forty-two percent want to “have enough money to work less/spend time as I want when older.”

Even though saving through tax-deferred accounts could help achieve this goal, current positioning of such options as “retirement” solutions leads Gen Y to favor taxable brokerage and bank accounts, the study found.

“The challenge for Gen Y is many are not focused on how they save,” said Laura Varas, principal of Hearts & Wallets. “Often, they invest too conservatively to accrue sufficient resources for later in life. To connect, providers and advisors need to talk about financial independence and short-term goals since many Gen Ys aren’t specifically working toward a goal of retirement.”