73 Will Be the Retirement Norm For Millennials - NerdWallet
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73 Will Be the Retirement Norm For Millennials


With the total amount of outstanding student debt approaching $1 trillion, the plight of debt-straddled college students is more pressing than ever.

In the past 30 years, not only has the number of high school graduates enrolled in four-year universities increased by 11%, but college tuition has soared over 200%. As more students attend college at a cost higher than ever before, millennials have increasingly turned to loans to help finance their education. While much of the college debt dialogue concerns immediate issues like employment and repayment, there is another glaring challenge for graduates: retirement.

When will students be able to retire, given that many are spending the first 10 or more years of their careers paying off loans? NerdWallet conducted a study that examined the financial profile of a typical college graduate. We found that while retirement is certainly not impossible, for most millennials it will have to wait until their early- to mid-70s — more than a decade beyond the current average retirement age of 61.

Key takeaways

  • Most of today’s college grads won’t be able to retire until 73 due to high debt load — 12 years later than the current average retirement age.
  • Given a life expectancy of 84, today’s grads will only have about 11 years to enjoy retirement.
  • The median debt load of $23,300 will cost students over $115,000 (in today’s dollars) by the time they retire.
  • Employer 401(k) matches are crucial, and will make up 50% of retirement savings.

Quick facts on students and debt

Here are some quick facts to give context on what students are grappling with.

  • Median debt for a student upon graduation: $23,300
  • Percentage of students who are unemployed at graduation: 18%
  • The median starting salary for those who do have jobs: $45,327
  • Standard loan repayment plan: 10 years
  • Average yearly loan repayment: $2,858
  • Number of college graduates currently estimated to be in default: over 7 million

$23,300 in loans costs $115,096 by retirement

The goal of the NerdWallet study was to make realistic retirement projections that applied to a broad range of students. The study compared three different financial profiles: the median graduate, with median debt and salary; the struggling graduate, with high debt and a below-average salary; and well-off graduate, with low debt and an above-average salary.

Graduate Retirement Outcomes

Student debt has a clear impact on retirement outcomes. Currently, the average retirement age is 61. But for most of today’s college grads, a realistic retirement age will be closer to the mid-70s.  Given an average life expectancy of 84, this will leave only 10 to 12 years  to spend in retirement.

A key factor: Although the median college graduate leaves school with a seemingly manageable $23,300 debt load, 7% of a student’s earnings go toward yearly loan payments of $2,858 for the first 10 years of his or her career. This precludes any meaningful contributions toward retirement. In fact, by the age of 33, when the typical college grad has finally paid off a standard 10-year loan, he or she can only be expected to have saved $2,466 for retirement — some $30,000 less than if the student had graduated debt-free. Even worse, the missed savings carry a serious opportunity cost, as this money would have been earning a compounded rate of return every year until retirement. At the projected retirement age of 73, the lost savings directly attributable to student debt is $115,096, nearly 28% of total retirement savings.

Surprisingly, the projected retirement outcome isn’t dramatically different for the struggling grad. Despite having nearly twice as much debt and starting with 10% less pay, the expected retirement age is 75, just two years later than the median case. The main reason for this is Social Security, whose viability by the time millennials retire has been the subject of much debate. Social Security benefits are factored conservatively into the study at $11,070 (75% of current average) per year beginning at age 67. That said, a substantial reduction in benefits or the disappearance of the program altogether would significantly alter the retirement equation. If the current Social Security payouts were to remain unchanged for the next 50 years, the benefits would provide future retirees a significant boost by accounting for nearly 15% of their required yearly income in retirement.

Well-Off Grads Retire Seven Years Earlier

The retirement prospects for the well-off grad are significantly better than for the others, as illustrated in the graph above. By graduating with a reduced debt load and landing a job that pays 22% more, the well-off grad can expect to retire at age 67. This demonstrates the importance of contributing to a retirement plan early in one’s career. Compared to the median grad, the extra $40,406 that the well-off graduate is able to contribute during the first 10 years of his or her career results in a $446,452 difference in retirement savings by age 73.

So how do you beat the odds?

Given these circumstances, should students resign themselves to an eternity of work with little to look forward to in their later years? Not necessarily. Though a rising retirement age does appear to be an inevitable economic reality, being conscious of this problem and tailoring financial and career planning accordingly can go a long way toward achieving retirement objectives. There are many factors that influence the age at which people are able to retire, but there are a few variables that have a particularly large impact. Making above-average yearly contributions to a retirement account, working for an organization with a decent 401(k) match and investing in index-tracking mutual funds are three ways to help add years to retirement.

Make above-average contributions to retirement accounts

While working for a generous employer can do wonders for retirement, not everyone can be so selective about whom to work for. Another important component of retirement planning is the yearly contribution rate. Making above-average contributions can significantly improve retirement outcomes. Though the study projects a 6% annual post-tax contribution (the average personal savings rate for Americans), increasing that number to 10% lowers the expected age of retirement from 73 to 69.

Employer 401(k) match is crucial

As fewer and fewer companies offer defined benefit plans, millennials will have to depend upon employer 401(k) plans to save for retirement. According to a recent Fidelity survey, the current median yearly matching contribution is $3,420. As shown below, these employer contributions are expected to make up roughly 50% of the retirement equation for millennials. By working for a company that offers a yearly matching contribution of $4,420 — $1,000 more than the median — potential retirees can lower their expected retirement age by up to three years.

 401(k) Match Makes Up Half of Retirement Savings

Invest in index funds

Contributing money toward retirement won’t be helpful if the money just sits in a savings account or CD. To earn a return, millennials must be willing to take some risk and construct an equity-oriented portfolio. This may be difficult for today’s grads, who have seen the stock market seemingly implode every five years; but retirement will be impossible if funds are invested too conservatively. The study assumed a 6% yearly return on retirement savings, a conservative figure given the historical performance of the market. That said, it is a rate of return that can’t be achieved without some equity exposure. The best way for an individual to overcome this problem is by investing in index-tracking mutual funds, which will offer a market return and low fees.

Retirement isn’t hopeless, but it will be difficult

Far more than their parents, millennials will have to rely upon proactive financial management to achieve retirement goals. Each generation has its own distinctive financial challenges, but the burden of college debt is unique thus far to millennials. The decline of pension plans, the uncertainty surrounding Social Security and the college debt epidemic have placed the onus on graduates to make conscious, forward-thinking decisions about retirement.


Future retirement statistics were projected by profiling three potential types of retireed: the median graduate, with median student debt and median starting salary; the struggling graduate, with a high debt load and a below-average salary; and the well-off graduate, with a low debt load and an above-average salary. The study factored in a range of other relevant variables to create the projections, including average 2012 Social Security benefit, average 2012 401(k) match, 30-year average national salary growth rate, 30-year average inflation rate, 30-year annualized S&P 500 returns, life expectancy, 30-year average personal savings rate, 2012 Stafford loan interest rates and standard loan repayment terms.

All projected figures are inflation-adjusted and discounted back to 2013 dollar-terms.

Data sources:

Bureau of Economic Analysis
Bureau of Labor Statistics
Fidelity Investments
National Association of Colleges and Employers
New York Federal Reserve
Pew Research Center
Social Security Administration
World Bank
Consumer Financial Protection Bureau

More From NerdWallet:

  • Payless 4 college.Com

    Excellent Article.. I recommend that every Family senting their student to College should read it. Understand the Numbers to understand the true cost of college.

    College is still and excellent investment of time and money. Yet, one is wise to set their Goals and focus on completing them as soon as possible.

    Every Extra Year of college increase the student loan debt for most students. That increase in student loans increases the total cost of college. That reduces the amount that can be saved and invested for their own retirement.Being a College student is one of life great chapters. Yet, Retirement last much longer than college. Without Savings to make retirement fun it will be anything but fun..

  • David

    The posted retirement age of 60 is completely inaccurate to begin with. People live longer and are in better health, so unless you are rich to begin with retirement at 60 is a joke. I plan on retiring at 70, but may work longer if I decide to. I enjoy my job and the people I work with and find it mentally challenging. I have a ton of outside things I enjoy but since I work in higher ed, I have plenty of time off to enjoy them. Being bored to death is the worst thing about retirement, got to keep the mind and body healthy!!

  • Paul Curley

    529 plans can help solve this issue of college affordability.

  • rwscid

    The article trys to say too much, as a result says too little. If you save money and reduce your expenses you can retire pretty much any time you want. If not, you can’t. It is not a math problem, it is a question of how you prioritize your life.

  • Akayr

    Starting salary for “struggling” graduate is $40K? Are you serious? That data seems like it comes from a flawed source.

  • Matthew Robinson

    why are you reading this. you should be reading mr money mustache.

  • Beth Hutton

    Yeah, well they said 67 would be the retirement age for the boomers, but I retired at 54, seven years earlier. Do this and do the same or better:

    *Get that first ok job and move back in with your relatives for a year or two and start saving. The more willing you are to pitch in on housework/grocery shopping /cooking /handyman-woman stuff, the longer they will put up with you. You millenials are doing this in droves, I know, but I did it too and I can tell you from first hand experience, it pays off big time down the road. Early savings are very important.

    * Every time you get a raise at work or unexpected earnings, direct it into savings, and cascade your savings into long-term investments. Savings compound if you’re smart where you put them.

    * As for major ticket items (cars, boats and the like) buy only used, at least until you are within a short shot of retirement. Living frugally is the second main key to retiring early, see also the next item. Buy house or don’t based on your instincts.

    *DIY as much as possible. That applies to cooking for yourself, carpentry, sewing basic plumbing or whatever else you know how to do. You can save a ton this way.

    *Pay attention to the changing laws that affect your retirement savings and take action to keep your returns maximized. This is hard if you have a high-attention job, but at least review your plans every other year. If you have a super-high-stress-high-pay job, get a financial planner.

    *Make sure you always have health insurance.

    * Believe in yourself! Be an optimistic overachiever (we boomers retiring early see ourselves as such, you can do it too). Go out and conquer the world, you can do it, really, we did, and so can you.

    * Good luck and may God bless you.

  • Dahn Shaulis

    More signs that the US working class are being crushed. Prepare to have a long work life (with little chance of retirement).

  • Theo Van Joolen

    unless you live in poverty in perpetuity [all too common now-a-days…I carry that honor], the stress of the student loan debt will more likely kill you by age 63!

  • Theo Van Joolen

    Bad Investment?

    I’ve never paid a student
    I doubt I ever will
    My monthly tab is half my pay
    I can’t afford that bill

    I defer in perpetuity
    I’m productive and employed
    By law I am called “destitute”
    So, the payments I avoid

    Some might think I live in shame
    And if I don’t:…you should
    Why didn’t you study finance
    So, then you could make good!

    It’s clear you wasted too much time
    On humanities and art
    On history and languages
    Does culture make you smart?

    You could have been a lawyer
    Or, learned a decent trade
    America needs engineers
    It’s your fault you’re not paid!

    Screw your wise humanity
    Your care for land and seas
    Get busy and create some wealth
    Fuck your damned degrees!

    These taunts I write are just a few
    You’ve heard them all before
    Enjoy your high school income
    For you deserve no more!

    Right-wingers always tell you
    They never took a loan
    And paid their way through college
    Worked their fingers to the bone

    Idealism makes them blind
    They praise the bankster-scam
    Declare that you’re just lazy
    And just don’t give a damn!

    You made your bed, now sleep in it
    You should have known your place
    You middle-class pretenders
    Won’t occupy our space!

    So this is what I’m going to do
    For I don’t need so much
    Just a room to hang my hat
    A place to stay in touch

    With languages and literature
    Artful film and books
    A laptop for my poetry
    Who cares how poor it looks

    I have no need to own a home
    A father I won’t be
    “Loneliness” will not compute
    I live with wild esprit!

    With a bicycle and camping gear
    I’ll hit the roads and trails
    I’ll climb the Adirondack’s peaks
    Explore the hills and dales

    I’ll openly commune with life
    Seek kindness where it lives
    Show my love for Mother Earth
    And everything she gives

    I won’t be sad or frustrated
    That I can’t pay it back
    The law says I don’t have to
    If income’s what I lack

    I’m proud of education
    I’ll pursue it to the hilt
    The elusive trillion dollars?
    Let bankers own the guilt!

    I’m blessed with one small irony
    I work in Ivory Halls
    And close to Master’s number two
    To decorate my walls

    The money fairy is not kind
    For me she does not care
    I much prefer the Greenman’s hue
    To her I give no prayer

    Am I a bad investment?
    I’m sure I’ll die in debt
    But will I still enjoy myself?
    Of course, for sure, YOU BET!

  • Theo Van Joolen

    the stress of long-term poverty is likely to kill you long before age 73. This is not just a numbers crunching game. Long term student debt is a public health issue. A major amnesty, or two, are absolutely essential for those who lost too many years in low-paying jobs.

  • BenguluruHuduga

    well, most corporates have a pyramid structure of growth. with retirement age growing. the pace of career growth will be slowing. it could well prompt the employer to terminate employees who haven’t shown growth in one’s career potentially leading to mid life crisis.

  • Anne

    so what if you graduate when you are 43 and you owe 300,000 in student loans…I guess I’ll retire when I am dead. :-)

  • Sarah

    How are you defining retirement in this study? I can’t tell how you determined that $343,392 was enough for one person but another person needed over $800k. Are you basing it off of salary replacement percentages?

    And how did you get the $2466 number that students are “only be expected to have saved” in the 11 or 12 years since graduation?? You’re saying that college grads will only save about $250 a year? I honestly don’t think you’re giving Millenials enough credit, or maybe I just hang out with a lot of frugal people.

  • hardlyfast

    Beat the System:

    1) Start a business, very important because of the deductions are worth it, and you might make some serious money too.

    2) Buy real estate, buy the worst house in the best location possible, even (especially) if it’s a fixer.
    there are 2 advantages: a tax deduction for interest and equity can leverage your loan into a well paying investment.

    3) Invest in the market using dollar cost averaging, buy a diverse portfolio including stocks, bonds and CDs.

    4) Take advantage of tax free investments like roth IRAs and gov. bonds.

    5) Live somewhere you don’t need a car to live. Drive an economy car or truck, or not. Always buy the base model, with cash if possible.

    6) Once you’re getting set, buy a rental and leverage the bank’s money while getting rent.

    7) Live cheap and realize that money won’t buy you happiness but it will buy you some time and comfort while you are alive.

  • hardlyfast

    …or just do what I did and smoke crack all day… whatever, nerdwallet…idiotic name for a website btw..

  • Guest

    Average age of retirement is 61? Wow! All these people I know planning to work until 70. I am 57 and I make way less than $45,000 a year. I’m a college graduate and I never made near $45,000 a year. I was able to stay out of debt in college. I had $600 in savings. I also had no skills to get a job–college hadn’t prepared me for a well-paying job so I’ve always worked low wage jobs. My monthly wage dropped $1000 a month when I moved to Utah. I’ve only recovered $500 of it in 8 years. I even took night classes in word processing and medical terminology and transcription. That helped for awhile until there was more automation and those skills weren’t needed. I am looking towards semi-retirement at 62. I want to get out of Utah as soon as I can. I moved to Utah to take care of my mother. Now that she is gone there isn’t any reason to stay here and I don’t much care for it. I figure in another state no one is going to want to hire me at 62. I am hoping I can take odd jobs. I certainly don’t want to stay here until I’m 70. If you think you are going to work until you are 70 don’t kid yourself. I’ve see a lot of people shown the door at 61 and 62. I had a hard enough time finding a job when I was 49 and that was before the depression, which they call “The Great Recession” began.

  • Jesse

    Become an independent business owner with Amway. Work hard for 2-5 years creating assets that will allow you to retire. Retirement problem solved.

  • Nick Anderson

    Life expectancy today is 84 but that’s an aggregate measure for society, that’s not the life expectancy for Millennials, taking into account advancements in modern medicine today and over the next twenty years, the life expectancy for Millenials is north of a 100, with 100 serving as the rough equivalent of today’s 60 in terms of health and mobility. Given all that, a retirement age of 73 is a pretty sweet deal, at least for my generation.

  • JJ

    We should all be so lucky as to bask in the radiance of your vast knowledge.
    It truly is refreshing to know of someone who has life figured out at such a young age.
    Ah, I remember when my knowledge was boundless, about 16 years of age…

  • Joseph Egoian

    According to Gallup study conducted several months, the current average retirement age is 61: http://www.gallup.com/poll/162560/average-retirement-age.aspx

    I agree, certainly part of the reason why the retirement age will continue to be pushed out is because of greater life expectancies. That said, I believe the rate at which the average retirement age is increasing exceeds the rate at which life expectancy is increasing.

  • dgauss

    I feel this simplifies life a little too much as well. This leaves out any change of emergency and/or act of god scenario.

  • BenguluruHuduga

    No. you got it inverted. Add in the necessities of life. Responsible families pay for kids college, ( 100K today ), pay down their home mortgages ( 300-400K ) and try to save for retirement. Here is the problem, retirement age is 66 today. People are working longer because of fluctuations in the economy. Those who wanted to retire in 2008 got undone by the financial crisis and had to push the retirement. Personal incomes are not rising. Career growth is almost non existant due to pyramid structure of growth. If life was that simple as you speak, articles such as this one, will not be published.

  • rwscid

    The only relevant act of ‘god’ for Americans is the one that caused them to be born Americans, after which their lives became incredibly easy. Several billion people prove, every year, it is possible to survive on less than $2.50 per day. If you simply must let your heart bleed for someone, let it bleed for them.

  • Joseph Egoian

    We could not model “act of god” scenarios into our study.

  • Joseph Egoian

    NACEweb conducts an annual salary survey for college graduates and found that for the class of 2013, the average grad makes $45,327: http://www.naceweb.org/s09042013/salary-survey-average-starting-class-2013.aspx

    The starting salary for the struggling grad in our study is more than a 10% decrease from the average. Of course, this doesn’t reflect the predicament of every “struggling grad”, but it does give directionally a sense of the potential retirement outcomes if you resemble the profile we outlined in the study. No doubt, there are people who graduate with huge amounts of debt and are unemployed for months before getting a minimum wage job, but that really represents a very small minority of college grads.

  • Poster

    $40K a year. Wealthy! I wish I could make that much and I graduated 35 years ago. Never made anywhere near that much.

  • Jason

    I’m a struggling graduate making $45k a year. The problem is that $45k is between two jobs, working 70-75 hours a week (that’s a 7 day work week to cut down on the number of 16-18 hour days I’d have to work if I took off weekends.

  • Joseph Egoian

    High student debt loads should not result in suicide.

  • Joseph Egoian

    Appreciate the question Sarah. We are defining retirement at the age at which you could replace 80% of your peak salary yearly for the remainder of your life (we assumed a life expectancy of 84). So if your peak salary was $60k, your savings would have to provide you with $48k every year through age 84.

    There are two reasons why the well-off grad has significantly more savings at retirement than the other cases: 1) They have a greater peak salary, 2) their savings need to be able to cover an extra 6-8 years since they are retiring earlier

  • Carrie

    Does the 80% replacement of your peak salary include Social Security?

  • Joseph Egoian

    Hi Carrie,

    The 80% represents the total income that needs to be replaced through your retirement savings AND your Social Security benefits. We assumed that people would receive the current average monthly Social Security benefit of $1,269 ($15,228 yearly) beginning at age 67. To go back to the example above, if you have to replace $48k per year in retirement, $15,228 would come from Social Security while $32,772 would come from retirement savings.

    There has been a lot of discussion over the future of Social Security and whether or not it will be around by the time Millennials retire, but for the purposes of our study, we wanted to be as conservative as possible with our estimates. Despite assuming absolutely no decrease in Social Security benefits, we still found the expected retirement age to be in the mid-70s.

  • Ralph Parker

    Where everyone makes $1/day you can buy your basic necessities for $1/day. Where everyone makes $100/day you can’t buy anything for $1.

  • Ralph Parker

    I think it is time for an anti college movement! The colleges could save their customers a ton of money by reducing their curriculum to only include essential classes and provide an online system to meet the other classes that they have historically imposed for a minimal charge. But they won’t, it is too much about money.

  • Ralph Parker

    It is tough when you fall behind a full work force. For instance, I hired in a company just prior to a long term freeze. That meant that there were a lot of folks just a little older than me. So they got and filled the higher positions and never left. So the promotional opportunities were slim. When the big one came, the one that I thought I would be ‘the one’, the younger generation had come in and still with the momentum of moving up the ladder got the promotion. I was left as the aged dinosaur.

  • rwscid

    A pound of beans or rice or corn costs more or less the same everywhere in the world.

    Tradable goods are generally priced the same throughout all the areas in which they are traded. Non-perishable food, the staple of most poor people’s diets, costs just about the same all around the world, unless politicians have made it cost less through subsidies or more through tariffs.

    PPP adjustments allow us to compare income, and what it will buy, between nations as diverse as Luxembourg and Eritrea.

  • Cindy Xi

    Millennials are shaping up to be the wussy generation. I graduated college in 1994. I took a job for 26k and had 30k in student loan debt. I lived in my buddies unfinished basement for 2 years while I scrimped/saved to pay down my loan debt, save a nest egg and buy my first condo – at an 8.5% interest rate on a 30 year.

    I continued to scrimp/save in order to completely pay off my debt, then purchased a bigger home. I moved up the ladder in my profession, I saved my money and today my family and I are just fine and continue to improve financially. We have our home, a vacation home, a couple of fuel efficient cars (all insured for $25/month with Insurance Panda), and what’s best – they are all paid in full. Ahhh the beauty of hard work and patience!

    Millenials want free education, 6 figures straight out of school with a “work/life balance” and 0 risk investments.

    Bust your butt, take some calculated risks and climb the ladder like generations before you. Despite what many will lead you to believe, the world owes you nothing. You owe yourself.

  • jmart

    with inflation thats only worth 13k 35 years ago