Why are millennials behind on retirement savings?
Student loans and homeownership are to blame.
Millennials have been blamed for a lot of things on their way into adulthood. Now the economic realities of the tricky decades this generation graduated into are catching up on them, with a recent survey finding that millennials are behind schedule when it comes to retirement savings.
Why Are Millennials Behind?
According to a survey by Northwestern Mutual, the average millennial wants more than $1.6 million to retire comfortably, but has saved less than $63,000 so far.
There are two main things making it harder for millennials to prepare for retirement: student loans and homeownership.
The cost of college has skyrocketed in the decades since millennials were born. When Baby Boomers were in their 30s, only 13% carried student loan debt but now 47% of millennials in their 30s carry student loan debt. This is putting additional strain on millennials to meet their financial goals, including saving for retirement, but also saving up to buy a home.
Buying a home in America has been complicated by a massive housing shortage and affordability crisis that has just gotten worse throughout the pandemic.
The costs to buy a home are high, but millennial homeownership rates are rising. With many buying homes later in life or remaining priced out of the housing market altogether, millennials are spending more time renting and less time building home equity, which affects their ability to save now and reap the benefits later in life.
Planning Ahead
In recent years, adults ages 18-39 saw their wealth increase by as much as 80% which is much more than other generations. This is driven by millennials’ growing interest in investing since the pandemic, which coincided with a strong market. Plus, there’s a multi-trillion dollar generational wealth transfer on the horizon. Some millennials may be set up to receive an inheritance to launch their retirement savings.
Millennials may be running behind schedule on their retirement savings, but with smart spending and savvy investments, there’s plenty of time to catch up.