Working longer might be the only option if you donāt have enough retirement savings.
Millennials like to buck trends, and this is true in the workplace, too. They’re often recognized by their enthusiasm for side hustles, have a track record for frequent job changes and, surprisingly, like to combine work and vacation.
A new study indicates these work habits might be vital traits for millennials given that most will have to work until they’re 70 before they can even think about retiring.
Only one in three workers will have saved enough to retire comfortably by age 67, according to a recent report by AON, a global risk and retirement consultancy firm. The study shows the average worker needs over 11 times their final salary saved to have enough money at full retirement age. To get there, employees will need to save the equivalent of 16% of their salaryāincluding any employer contributionsāeach year beginning at age 25. The takeaway: Starting early is key, because delaying contributions by just a handful of years has an outsized effect on your money’s ability to grow with compound interest.
There are a number of obstacles to preparing for retirement for workers. Pensions are all but dead, so unless you’re a government employee, you’re mostly on your own when it comes to retirement savings.
The 401(k) was introduced to fill that gap, and it’s a great tool for stashing away retirement money (if your employer offers one). But unfortunately, people tend to put just 4 to 7% of their salary into their 401(k)s, according to AONāthe minimum amount most employees need to contribute to earn their employer’s contribution match. Worse, only 30% actually participate in a 401(k) plan at all.
The other reason so many Americans’ retirement savings are falling behind is one we have little control over: Wages in the U.S. have stagnated over the past four decades. Since 1979, middle class wages have increased by just 6% when adjusted for inflation, and lower-class wages have decreased by 5%. Meanwhile, the cost of living and the cost of medical insurance have skyrocketed, making saving for retirement that much harder.
Add to all this is the amount of debt millennials are saddled with. The average student loan debt balance is $32,731, and on top of that, the average american has $5,700 of credit card debt. And with the oldest millennials now starting families and buying houses, saving for retirement has only been pushed further down the priority list.
While no one likes the sound of putting off retirement, it can have a big impact on your quality of life in retirement. According to the National Bureau of Economic Research (NBER), delaying retirement by just three to six months could have the same impact on your finances as saving an extra 1% of your salary annually for the 30 years leading up to retirement. But putting the maximum you can afford into retirement savings now might be the better path toward enjoying your golden years.