Too Little, Too Late? The Reality of Millennials Trying to Catch Up on Retirement Savings

If you’re anyone who is starting to think about retirement, there is every reason to start planning as early as possible. In fact, many millennials hope to set aside enough money to properly enjoy retirement without worrying about living paycheck to paycheck. 

Unfortunately, the retirement plans for millions of millennials look anything but strong right now. Numerous challenges have affected their ability to set aside money in the same way their parents and grandparents did. 

Delayed Career Starts

One unavoidable turn of events is that many millennials born between 1981 and 1996 were potentially looking to enter the workforce during or immediately after the Great Recession of 2008. This meant trying to find a high-paying job when unemployment was high and wages were low. 

In some strange way, even though wages had increased on average by 67% since 1970, inflation-adjusted earnings weren’t keeping up with the cost of living, so any job millennials could find did not provide enough disposable income to start to put away meaningful savings. 

As a result of this recession and delayed start, as many as 30% of millennials took on roles in the gig economy. While this might be a great idea to keep the bills paid, these are not roles that have 401(k) matching, so any retirement contributions would be few and far between.

Finally, the biggest hindrance with a delayed career start for millennials is the lost years you have to compound returns that are saved. If you have an average return of 9% and a millennial starting putting away money at 30 instead of 25, this five-year difference means you must put away $370 per month to achieve a $1 million nest egg by 65. Alternatively, if this millennial had started saving at 25, it would only take $200 per month to hit the same goal by 65, or an additional $2,040 in savings put aside yearly. 

Student Loan Debt

According to the Education Data Initiative, the total amount of student loan debt in America is approximately $1.693 trillion as of January 2025, of which 46.6% belongs to the millennial generation. With an average balance of $40,438, there is no question that high student loan debt is significantly delaying millennials’ retirement savings. 

Further supporting the idea that student debt is crippling the millennial generation, 42% of those aged 25 to 36 have debt, compared to just 24% of Gen Xers. As a result, a Bank of America survey indicated that 78% of millennials feel they cannot save for retirement and buy homes due to substantial outstanding loan amounts. 

This leads to a straightforward reality for this generation, a result the Millennials Readiness for Retirement study highlights. This hard truth is that another 68% of millennials say that student loans will delay retirement as they are forced to prioritize paying off debts. 

Increasing Living Costs

One final crushing blow to retirement savings is that the rise in housing costs is leads millennials to pay 39% more for their first homes than baby boomers. According to Student Loan Hero, this reality will no doubt push millennials into continuing to rent, which is another hindrance to building up savings, some of which can come from home equity that you might find with a house. 

Another scary reality for millennials is what the dollar’s value will look like when they retire. In 2022, when a Business Insider study looked at the dollar’s value, $1 million in savings in 2060 will equal just $306,000 in money today. This is perhaps the hardest truth to accept, as it means that millennials will need far more than just $1 million to enjoy a retirement at 65 compared to the type of retirement $1 million might provide today. 

Adding to the burden millennials already face, one in four are helping support parents struggling financially after losing their retirement savings in the Great Recession. On average, millennials give parents $7,000 annually, meaning they will lose $500,000 in compounded investments over the next 30 years. 

What About Current Strategies? 

As it stands, current strategies do not seem sufficient to close the savings gap many millennials face. On average, Fidelity Investments indicates that even though millennials boosted their savings from an average of 7.5% to 9% over the past few years, it’s still below the recommended 15% annual savings. 

Another major concern is that traditional retirement planning often considers careers to be linear. Unfortunately, this isn’t the reality millennials face anymore, as both careers and income growth are not linear and require jumping from job to job, often as frequently as every two years, to see any kind of substantial income growth. 

There is also a genuine concern over market volatility when millennials have already faced the dot-com and Great Recession market corrections. This has undoubtedly shaken their confidence in the market, especially after what they saw the Great Recession did to their parents’ savings. 

Perhaps most importantly, far too many millennials are not financially literate enough to make informed investment decisions. This means they lack the knowledge to follow the strategies that might get them to where they need to go regarding savings. 

What Is The Solution? 

Among the most essential steps anyone can take to right their retirement ship is to get more aggressive with paying off any outstanding debt. This is especially true around student debt, where students should consider something like the snowball method, which will have you paying off the smallest of your loans and building up the largest outstanding loan. 

Of course, no action should be taken without a plan, and even if you feel like your plan is starting too late, better late than never. Between kids, job, life, work, etc., you may feel like your life is moving at warp speed, but you need to slow down, look at your existing strategy, and tweak where and when necessary. 

Speaking of kids, many millennials are likely entering a phase of their lives where spending only accelerates once children enter the picture. This is why you must watch your spending to ensure you aren’t spending more than is coming in. 

Another big consideration is taking advantage of employee benefits like 401(k) matching, as millennials should maximize their earning potential. This is essentially “free” money you are being given from an employer. Along with the 401(k), you should also look at stock purchase plans, which could be another avenue for long-term savings. 

At the end of the day, millennials need to start building up their savings in small amounts. Trying to put too much away too fast is the wrong approach and often leads to failure. Instead, start small and build your way up to a substantial savings number, and this will train your habits to put aside money before you spend on anything else. 

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