New data show 1 in 5 supported an aging parent over the last
year, spending an average of $18,250 a year on medical bills and other expenses
— more than any other generation, according to TD Ameritrade's recent 2015
Financial Support survey. That single expense puts a serious strain on
their ability to pay off student loans and save for retirement.
Additionally, millennials face a challenging job market and lackluster
wage growth. About 23 percent of 18-to-34-year-olds are underemployed,
according to Anthony Carnevale, director of the Georgetown University
Center on Education and the Workforce. Meanwhile, student loan debt has reached
record highs. On average, student borrowers who graduated this year owe
more than $35,051, according to Mark Kantrowitz, a student financial aid policy
expert and publisher of Edvisors.com. Paying off debt has made it tougher
for many to set money aside.
In addition to pushing off saving for retirement, nearly
half of millennials said they were delaying buying a house, according to the TD
Ameritrade survey, which included 1,000 adults age 18 and older.
Twenty-nine percent said their financial obligations prompted them to delay
getting married and 38 percent said they postponed having children.
Living through the Great Recession from December 2007
to June 2009 and its aftermath has also affected their attitude toward money,
said Janet Stanzak, a certified financial planner and principal of Financial
Empowerment in Bloomington, Minnesota. But millennials are also more motivated
to plan for their financial future and savvy about how to do it, she said.
Although Social Security is likely to remain a source of
income for millennials in retirement, albeit a smaller one, the Social Security
Administration projects it will have enough money from payroll taxes to cover
three-quarters of benefits it has promised retirees after 2034, when its reserves
are scheduled to run out . Many millennials say they aren't counting on it.
Nearly two-thirds of millennials surveyed by T. Rowe
Price earlier this year said they believe they're more likely to win the
lottery than to receive any money from Social Security. And a Northwestern
Mutual survey found 73 percent of millennials expect to work past 65
because Social Security won't take care of their retirement needs. That's not a
bad thing, necessarily, said Stanzak, noting that they are quick to take
advantage of 401(k) plans and company matches.
Still, 4 in 5 millennials said retirement planning was their
top financial challenge, according to Lincoln Financial Group's annual Measuring
Optimism, Outlook and Direction (M.O.O.D.) of America survey. Indeed, many are
not contributing as much as they should.
The rise of auto-enrollment programs and new streamlined
sign-up processes have helped draw in more young workers: One report published
this spring by BMO Retirement Services, for example, found participation rates
among workers 25 to 34 years jumped 22 percent in plans with an
automatic-enrollment feature. And for workers under 25, participation in
auto-enrollment plans was more than double that of voluntary enrollment plans
(29 percent versus 68 percent).
But while advisers typically recommend workers contribute 10
to 15 percent of their income (including any employer match), T. Rowe Price
found in a recent study that the average default contribution rate
for millennials was 3 percent.
Still, advisers are encouraged that many millennials are
setting something aside, despite the financial planning challenges they face.
About 83 percent of the millennials polled by Lincoln Financial said they save
money from every paycheck, compared with 78 percent of the general population.
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