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Retirement at 75?

Man at computerChances are you’ve wondered about the prospects of younger Americans. Will they enjoy the same economic conditions that their parents lived through? Will retirement still be an option for them?

The NerdWallet organization recently issued a report which found a few differences between today’s college graduates and those of 20 to 40 years ago. For one thing, they carry a lot more student loan debt: $35,051 on average. That means, again on average, that the new graduates will be paying $4,239 a year for ten years before they can properly start saving. NerdWallet estimates that these higher loan payments could potentially reduce future retirement savings by 32%—an average of $700,000.

In addition, today’s younger generation faces higher rental payments—up 11% since 2012—and having to delay home ownership to a median age 33. This, too, reduces their ability to squirrel away money for the future.

Finally, millennial investors have apparently been powerfully impacted, psychologically, by the Great Recession. NerdWallet found studies showing that younger savers keep an average of 40% of their saved money in checking and savings accounts or CDs. This means they’re missing out on investment returns, which would cost them more than $300,000 in future retirement funds, on average.

Add it all up, and the NerdWallet researchers estimate that today’s college graduate won’t be able to retire at the traditional age 65. On average, they’ll have to wait until age 75 before work (and an income) is optional. The site notes that the graduate would have to save 15% of his/her income a year starting at age 23 to bring retirement back down to age 65—which may not be possible due to higher student loan debt and rent, and won’t be anywhere close to possible with a 40% allocation to cash.

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One Response to Retirement at 75?

  1. Jerry November 12, 2015 at 9:39 am #

    Article fails in assumption that ’20 to 40′ years-ago-students would even consider student loans. As a last resort, they worked their way through delaying graduation gratification for several years.

    It seems student loan program is just another of the failed ‘subprime loan’ mentality that diminished the economy in the early 2000.

    Will today’s Americans, ever learn there is no such thing as a free lunch. Or, must they learn the hard way when the trough (national debt) becomes empty.