In its recent survey of American adults, TD Ameritrade found that 66% of Millennials – defined as those aged 23-38 – say they aren’t meeting their retirement saving targets.
This is likely unsurprising, given the wide reporting of the debt burden, mainly from school loans, that rests on their young shoulders. Probing deeper, though, the poll revealed something surprising.
When pollsters asked these respondents why they aren’t saving sufficiently for retirement, the number-one answer, voiced by 37%, was elevated housing costs. Rental prices have been rising of late, and 20% of Millennials with children said that at least half of their income (50-59%) goes to provide for housing. A significant minority of Millennial parents said they pay even more.
Traditionally, housing costs have been reckoned as taking 25-30% of your income. If Millennials are paying twice that amount and facing loan payments as well, there’ can’t be much left over for retirement planning. Indeed, personal finance experts suggest that half of one’s income should go to meeting all essential life needs, with 20% as a minimum allocated to savings and investment.
Strikingly, 33% of the target group said they’re helping to support other members of their family, a burden that prevents them from saving for retirement. We suspect this mainly involves elderly parents, although younger siblings in school are often targets for assistance, too. The fact that so many cash-strapped Millennials are an income source for others suggests a wider societal pattern of income shortfall.
Just over twenty percent of Millennials said that student loans are inhibiting them from saving. After all we’ve considered, this might not sound too bad, until we compare it with older generations: for example, only 5% of Baby Boomers say that student loans had a deleterious effect on their retirement planning.
For more information, please read:
The No. 1 reason millennials are struggling to save for retirement—and it’s not debt | CNBC