Millennials Face Tough Retirement Road Ahead

The millennial generation is typically digital savvy, well-educated and active in their communities. The group is made up of young adults from about 18 years old to those in their early 30s. Even though they have lived through some of the worst financial crises in recent times, they may not be prepared for retirement planning.

Millennials as a whole are generally more educated than their parents’ generation. But with education comes student loans and debt. A recent CNBC article says there was over $1 Trillion in student loan debt in 2012. That’s an average of $30,000 per borrower. When a young adult is considering buying a new vehicle or a home, significant student loan debt can be a significant factor in obtaining financing.

The Great Recession hit just as many millennials were joining the work force. Others, still in high school or college, faced even greater career difficulties as much of the country was unemployed or underemployed by the time they planned to start their career. Many took low paying jobs straight out of college just to make ends meet and are struggling to join the workforce in a career in their field of study.

The solution for many millennials has been to move back in with their parents. About a third of millennials are living with their parents’ today.1 Others choose to rent a home with several other people to share the cost of rent and utilities. While their housing situation may not be the most admired, millennials have other financial concerns. Should they be paying off student loans, saving for a better housing situation, or saving for retirement? Often, retirement savings is deemed the least important because it’s not the most pressing concern.

Unlike their parents, whose main source of retirement savings came in the form of company pensions, millennials are likely required to save on their own. If a 401(k) is offered through their employer, millennials are encouraged to take advantage of it. For example, if employers match employee contributions up to 6%, employees should try to contribute at least that much2. Jacob Gold, a retirement coach and financial advisor, equates not contributing to an employer matched 401(K) with leaving free money on the table.2 It’s also important to make paying off debt, maintaining a strong credit score and maintaining a decent balance in your savings account a priority.

Many financial advisers argue that repaying student loan debt should be the most important priority. Defaulting on student loan debt will affect credit scores and may be part of the reason why 67% of people under 30 have a credit score that is lower than 6801. Credit scores affect everything from buying a home, getting a vehicle loan, and interest rates on future credit cards.

Another financial concern for millennials may be saving for the immediate future. It’s very important to have a short term savings should someone lose their job, have health issues or anything else that prevents them from working or having an income. Many financial planners suggest a savings of at least two months’ worth of income as a savings safety net.

Unfortunately, many people have not saved enough for retirement. Of course there will be different saving goals and strategies depending upon age and lifestyle, but everyone should be working toward the most comfortable retirement they can afford.

If you or someone you know hasn’t saved enough for retirement, there may be another option. Homeowners who are at least 62 years old and have significant equity in their home may be eligible for a reverse mortgage loan. Reverse mortgage loans allow homeowners to tap into some of their home equity in the form of monthly payments, a lump sum payment or as a line of credit. For more information about how you can use a reverse mortgage loan as part of your retirement plan call 866-751-6105 today.

1 http://www.cnbc.com/id/102216469#
2 http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/11/10/3-ways-to-rethink-retirement-for-millennials