Study: Average Millennial Can’t Retire Until Age 73

Student debt will cost the average millennial $115,096 in lost potential retirement savings, a new study says.

Generation Y wants to know: Why does college cost so much?

The typical millennial college graduate has a student loan bill of $23,300 tucked in with his diploma, and a median starting salary of $45,327, according to new research by NerdWallet. Millennials, also known as Generation Y, are the generation born between the early 1980s and the early 2000s.

The study says most won’t see retirement until age 73, 12 years later than the current average retirement age, which, surprisingly, is 61. It was based on data from a variety of sources, including the Bureau of Labor Statistics and the Pew Research Center.

Are things really that dire? According to the Federal Reserve Bank of New York, less than 45 percent of 25-year-olds had student loan debt in 2012. Of those who did, 40 percent owed $1,000 to $10,000, and another 30 percent owed between $10,000 and $25,000.

But, here’s what else the NerdWallet study had to say:

  • The average millennial will be 33 years old when he pays off his loans, and have only $2,466 saved for retirement by then. He would have had more than $30,000 if he had graduated with no debt.
  • Because of the lost compound interest on that money, the average millennial will miss out on a total of $115,096, “nearly 28 percent of total retirement savings.”
  • The NerdWallet study assumes Social Security benefits of $11,070 per year starting at age 67. “A substantial reduction in benefits or the disappearance of the program altogether would significantly alter the retirement equation,” it says.
  • The NerdWallet study assumes “employer contributions make up roughly 50 percent of the retirement equation for millennials.” An above-average yearly matching contribution of $4,420 to a 401(k) can reduce the retirement age by up to three years.
  • The NerdWallet study assumes a 6 percent personal savings rate, but bumping that up to 10 percent could knock four years off the retirement age.

The U.S. Department of Education has a new study looking at average monthly student loan payments a year after graduation. It found that in 2009, 31 percent of borrowers spent 13 percent of their monthly income on student loan payments. It also found:

  • The average salary for the 2000 graduate was $39,300 (in 2009 dollars). For the 2008 grad, it was $34,400 (also in 2009 dollars).
  • Only 18 percent of borrowers in 2001 had debt burdens greater than 12 percent. In 2009, 31 percent of borrowers did.
  • In 2001, 18 percent of graduates lived with family one year after finishing school. In 2009, 27 percent did.

Got any retirement advice for today’s unfortunate graduates? Comment below or on our Facebook page.

Stacy Johnson

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  • ProfBillK

    Too many high schools kids are ill-prepared to make well informed college choices, and ill-advised regarding their college choices. The financial outcome should be considered in the mix. If a student does not have someone to pay most of their college costs or promises of substantial financial aid (grants and merit scholarships) for all four years at a private college, they should go to a community college for 2 years, followed by a good 4 year public college. Their potential salaries after graduation should be a important consideration, as well.

  • ProfBillK

    States provided ~50% of public college budget funds directly in the early 1980s. That is down to 15% now, it will be zero in 25 years. We are transitioning from state supported public higher education to state associated universities (name only). Most of those costs are being shifted to students/parents. That is why tuition is increasing faster than inflation and that is why it will increase faster than inflation for the next ~25 years. It is NOT the 1 to 2%/year average salary increases faculty have received at public universities during the past ~20 years.

  • Millennial Village

    Society has hyper-stressed the importance of a four year degree to the previous two generations (Gen X & now Millennials) which has led to a saturation of college graduates…resulting in devaluation of college degrees while tuition has only increased. I’ve worked in higher ed for 13 years and I’m frightened at the flood of high school students arriving on our university doorsteps who are not suited or prepared for liberal arts education. Colleges are pressured to meet enrollment goals so they conditionally accept these students & their tuition checks while they spend their entire freshman year in remedial courses adding yet one more year of student loans to their debt load.
    If the majority of the workforce (employed & unemployed) have college degrees it’s probably safe to say that a significant percentage of the workforce possess student loan debt (debt that wouldn’t exist if not everyone had made a go at a college experience) and IF 8-20% of the workforce is unemployed, a percentage of those with student loan debt are defaulting on their loans. I fear the growing number of degree mills combined with the growing number of college enrollees are setting us on the verge of an education bubble that will squelch any economic recovery hopes on the horizon.
    I’d like to suggest that Instead we stress education over college and stop manipulating our high school students with stats and infographics highlighting “total life earnings of college graduates vs. those without degrees” and begin including “lifetime earnings of certified_______” (e.g. brick masons, mechanics, electricians, plumbers, etc.) and also show the unemployment stats of tradesmen vs. liberal arts graduates…or maybe just include the average estimate from a local plumber for a half-day of work?

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