Not so surprisingly, many millennials haven’t started saving money for retirement. Millennials are in the highest bracket of putting off until tomorrow when it comes to saving.
A recent survey showed that over 64% of this age group do not believe they will have enough money when they retire to live comfortably. In fact, many believe they will need to continue to work well past retirement age.
Let’s look at some of the reasons millennials will have a really tough time when they finally do retire.
1. Not Having A Goal For Retirement Savings
If you’ve never calculated what you need for retirement, you’re in for a shock! Studies have shown that of all generations, millennials between the ages of 25 to 34 are the smallest percentage of people who have even attempted to calculate how much money they will need to retire.
By not having a set goal for retirement savings, many millennials will have no idea how much to contribute into a plan each month. Perhaps this explains why on average, the contribution levels from each paycheck is a paltry 7.3% for millennial men and 5.7% for millennial women. The result is that 75% of millennials between the ages of 25 to 34 have savings and investments of under $25,000 total.
2. Putting Off Saving Money For Tomorrow
The same survey showed that only 4 out of 10 millennials have actually started a savings plan for retirement and half of them live paycheck to paycheck.
Putting off making retirement contributions has a seriously negative impact on your future. Due to IRS regulations, it’s can be practically impossible to “catch up”. The IRS has a ceiling on the amount of money you can put into a 401(k) and an IRA. Each year you cannot go over $18,000 in contributions to your 401k and $5,500 into your IRA. Therefore, if you wait until you’re 40 to start bulking up your retirement account, you’ll never be able to make up those lost years, no matter how much money you earn.
3. The Problem With Student Loans
Student loans taken out by millennials average $37,172, which is up 6% from last year. Many students strongly believe in further education which causes such a rise in loans. There is no doubt that a higher education will lead to a higher income upon graduating and most students just don’t have the funds so they take out loans.
Statistics show that back in 1993, the average percentage of students taking out student loans was only 45% with an average balance of $15,000. Obviously, those numbers have increased greatly since then and because of that, millennials will not be able to contribute to an IRA and/or 401k because they’ll be too busy trying to pay off their student loans.
4. Accepting The First Job Offer That Comes Along
Faced with the reality that their student loans must be paid off, most millennials will grab the first job offer that comes along, regardless of the salary.
What’s worse is that they won’t even negotiate their salary one cent. Surveys have shown that 9 out of 10 employees have never negotiated for a better salary for fear they would not get the position. By not negotiating, millennials are shortchanging themselves and their potential for retirement.
5. Prioritizing Their Kids’ College Funds Over Their Retirement
According to TD Ameritrade, 19% of millennial parents believe their kids’ college education is their first priority. Granted, this is based on the fact that they have personally had a tough time with their college loans.
Millennial parents are putting aside approximately $310 each month toward their children’s college education. On top of that, they’re also making roughly the same monthly payment on their own student loan debt. Unfortunately, saving money for retirement is third on the list of priorities.
When you begin to understand the uphill climb it is to reach your retirement savings goal, you’ll get a better grasp of why you need to start saving now. Some day you will retire and realizing that fact of life now will help you better plan for it so you can enjoy your retirement when it’s time.
At what age did you begin to seriously begin investing in your retirement?