It might be decades away, but 26-year-old Alison Scott is worried about retirement.
The Las Vegas resident is working as a nanny as she pursues an acting career. She said she would love to retire around 65, but expenses such as rent, groceries, gasoline, insurance and medical care often take priority over a savings account.
“It’s difficult when you’re living paycheck to paycheck,” she said. “I don’t have any savings for retirement at age 26, and I’m not in the situation where I’ll be saving for it anytime soon.”
Scott is far from alone. A 2018 study conducted by the National Institute on Retirement Security, a nonprofit research organization, found that 66 percent of those between 21 and 32 have nothing saved for retirement.
A number of factors come into play for this generation waiting to save for retirement, according to Mahesh Odhrani, president of financial planning firm Strategic Wealth Design.
This age group is “just not financially stable,” he said. Some of the biggest factors he has seen are student loan debt, credit card debt and child care costs.
Odhrani has been working in finances for about 15 years and said he’s seen fewer millennials saving for retirement than previous generations did at that age. He theorizes that growing up during the Great Recession plays a role.
“A lot of parents were not able to support their kids through college in the recession time, so a lot of the kids had to pick up student loan debt,” he said.
According to LendEDU, an online loan marketplace, 60 percent of 2016 graduates had debt, with an average student loan debt of $16,723.
Credit card debt also takes away from savings. According to a GOBankingRates survey of more than 2,000 American adults, the average credit card debt amount for those between the ages of 25 and 34 in 2017 was more than $7,300.
Saving might be harder for residents in Las Vegas, a city that thrives on leisurely spending. Whether it’s grabbing a drink after work or hitting the clubs on the weekend, younger adults in Las Vegas are surrounded by instant gratification opportunities that come at a price, said Sonia McTaggart-Anderson, CEO and founder of Andson, a nonprofit educational organization.
“It’s the social aspect that’s available today, especially in Las Vegas,” she said. “There’s so much at our fingertips to spend instantly.”
Laura Hutton said she doesn’t feel the need to panic about saving for retirement — at least, not yet.
The 26-year-old owns and operates Shift 3 Consulting, a business consulting firm. While she doesn’t have student loans to pay off, most of her spare money is being reinvested in her business. She plans to wait until she is 30 to start a retirement savings plan.
“As an entrepreneur, I don’t have a service to start saving for a 401(k),” she said. “I feel like I’ll just work until I’m dead.”
Travis Scribner, a managing partner at wealth management firm WestPac Wealth Partners, said business owners are notorious for not saving for retirement.
“They view the investment in their business as the best investment, hoping one day they can monetize the business and sell it or at one point in the future the business will generate enough revenue for them to put away for retirement,” he said. “I don’t think the ‘all your eggs in one basket’ approach is the wisest decision to anything.”
Effect on future
Fewer savings toward retirement means more workers will be retiring well past 65. A 2015 study from financial information website NerdWallet.com found the class of 2015’s average expected retirement age is 75.
But that doesn’t mean they can skimp on retirement savings.
“We’re living a lot longer due to modern advances in medicine,” Scribner said. “One, that allows you to work longer, and two, you need a lot more now to retire.”
That can have a ripple effect on younger generations.
“The lack of them leaving the workforce creates less upward mobility for the younger generations,” Scribner said.
Hutton said figuring out personal finances can be difficult. Her K-12 education failed to teach her basic skills such as paying bills or taxes.
“It would’ve been nice at one point to learn,” she said.
Even now, she said it’s hard to know where to turn.
“I have just recently found out about financial advisers,” she said. “I didn’t realize you could go for free counseling.”
Odhrani said many younger adults don’t know where to go for help or that many advisers offer basic financial education.
“We don’t get a whole lot of millennials walking in the doors saying they want to do financial planning,” he said.
For those that do seek advice, Odhrani said his biggest tip is to start saving as soon as possible. Retirement savings could be part of that equation, he said, but a 401(k) might not be the best move for every young adult — at least right away.
“First, any high credit card debt should be paid off immediately,” he said. “And they should start building a decent-sized rainy-day fund.”
Scribner said there is no suggested age to start saving for retirement; it all runs on a case-by-case basis. But he advised putting away at least 15 to 20 percent of income as some sort of savings.
“If nothing else, develop good saving habits,” he said. “It’s not rate of return that creates success for the individual investor, it’s rate of savings.”
Contact Bailey Schulz at firstname.lastname@example.org or 702-383-0233. Follow @bailey_schulz on Twitter.