Key insights
- A survey indicates that a majority of millennials fear outliving their retirement savings due to financial burdens like student loan debt and supporting aging parents. The article suggests strategies to catch up, such as investing early and maximizing employer-matched contributions. The impact on US equities is slightly negative, as increased retirement savings could reduce current consumption and investment in riskier assets.
%3Amax_bytes(150000)%3Astrip_icc()%2FGettyImages-1599184426-1b212f16f22a4b96904bb0f4f5c0eb6a.jpg&w=3840&q=75)
Get personalized, AI-powered answers built on 27+ years of trusted expertise.
Millennials are worried about their retirement prospects.
In a new survey by financial services and insurance company Northwestern Mutual, more than half (55%) of millennials said they were somewhat or very likely to outlive their retirement savings. Forty percent of baby boomers and half of Gen X said the same.
So why are so many millennials particularly anxious about retirement?
While this group, ages 30 to 45, is often criticized for spending too much on coffee and avocado toast, they face competing financial burdens, including caring for aging parents, saving for a child's education, and putting money aside for retirement.
"We're seeing aging parents and grandparents need much more support," said Keller Lindler, a financial advisor at Northwestern Mutual.
Many millennials also carry significant student loan debt.
Many millennials feel like they don't have enough money to last throughout retirement, but it's still possible to get ahead—try investing a small amount every month, contribute enough to receive your employer match, and consider opening an IRA if you don't have a workplace retirement plan.
A Vanguard report from last year found that millennials had non-housing debt of about $12,000, including student loans, auto loans, and credit card debt, when they were in the 35 to 38 age range. When baby boomers were the same age, they had half as much nonhousing debt.
"The financial strain of this debt burden poses a significant challenge for younger individuals trying to save for retirement," the Vanguard report noted.
For millennials, it isn't too late to catch up.
Starting as early as possible, even if it's in your 30s or 40s, can make a big difference. If you start saving at age 35 and invest $500 every month, you'll have more than $675,000 at age 65.
Plus, check whether your employer offers a matching contribution for your workplace retirement plan. Even if you can't invest much, try contributing enough to earn your employer's match, since that's essentially free money.
If you don't have a 401(k), consider opening an individual retirement account (IRA) with a brokerage. Although these accounts have lower contribution limits than traditional 401(k)s, they still offer tax advantages. For example, with a Roth IRA, you pay taxes on your upfront contributions and don't pay taxes on your earnings when you withdraw in retirement.
Get personalized, AI-powered answers built on 27+ years of trusted expertise.