Today’s graduates could retire as late as 75.


High student debt, skyrocketing rents and poor investment choices among Millennials are all conspiring to push back their expected retirement age to 75 (13 years later than today’s average of 62). Analysis from NerdWallet, a financial information website, suggests that today’s 23-year-olds can look forward to a measly 9-year retirement, on average, since they can expect to live until around 84.


The website PLANSPONSOR took a close look at the data (“Millennials Could Face Late Retirement,” October 2015):  


  • Since 2012, the average student loan has increased by $5,500 to a total of $35,051. Higher loan repayments are diverting money that might otherwise have gone into a retirement fund or towards a down payment on a home. 
  • The median age of first-time homebuyers is 33, so young adults are renting for longer and putting off investing in bricks and mortar. According to research from the property website Zillow, rents have shot up by 11% nationally since 2012.
  • Of the money they do manage to scrape together, Millennials are not putting it to great use—40% of their savings sit around in low-interest bank accounts and the like. A need for ready cash is understandable, but young people are missing out on the higher-growth returns yielded by longer-term investments.


On TIAA’s Starting Out website, personal finance expert Paula Pant identifies “The Top 10 Mistakes Millennials Make With Their Money”. Here are some mistakes made by 20-somethings that could be sowing the seeds for a delayed retirement:


  • Neglecting to build an emergency fund, covering three to six months of living expenses in case of emergency.
  • Fearing the stock market. Even if they are dutifully putting money into a 401(k), have they checked the asset allocation? It shouldn’t be weighed too heavily towards lower-growth, more conservative investments, such as bonds.
  • Racking up those credit card debts. Student loans are burdensome enough; fresh graduates should avoid the quick fix of borrowing money for big purchases.


Now the good news: Millennials have time on their side, with four or five decades ahead of them before retirement. Some even have the luxury of living with mom and dad while paying off their student debts and thinking about where to invest their money wisely. The best place to start is with a company retirement plan. However small their salary or big their other commitments, it’s absolutely crucial that young employees take full advantage of every employer-matched dollar. Walking away from free money is never smart, especially when compound interest can work its magic over four or so decades and turn that money into a sizeable nest egg.