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October 23, 2013 at 11:28 AM
Student debt will play the largest role out of all the factors leading to an average retirement age of 73 for Millennials with college degrees.
Although Americans of all generations of Americans are preparing to work longer due to inadequate savings coupled with an expanding life expectancy, it is student debt that is the biggest catalyst for Millennials’ elongated working lives and abbreviated retirement.
According to a recent study from NerdWallet Investing (NerdWallet) — an online information provider on the financial markets, investing and the overall economy — with a median debt load of $23,000 upon graduation, Millennials have a steep hill to climb up before they can begin comprehensively planning for retirement.
Recently, there has been much grousing over the exploding cost of higher education coupled with high a level of concern about the debt young graduates are saddled with. The issue has gained national attention from those on both sides of the political spectrum with no concrete action taken to explain, let alone reign in, the extreme escalation when it comes to college tuition.
Data in the study finds that over the last 30 years, college tuition has soared over 200 percent. In a society that is increasingly demanding some type of higher education, Millennials are turning to student loans to finance their education.
Through the study, NerdWallet sought to nail down realistic retirement projections for three Millennial subgroups: the Struggling Graduate; the Normal Graduate and the Well-off Graduate. (see chart).
The Normal Graduate, who best represents the average position of Millennials in the workforce, is spending 7 percent of their annual earnings on debt repayment. With an average repayment plan of 10 years, they are prevented from making the adequate contributions toward retirement.