Coming of age during a time where wars in the Middle East and a crashing housing market took their tolls on the U.S. economy, millennials—despite their youth and skill sets—will be shortchanged when it comes to planning for retirement, according to a recent CNBC commentary.
Defined as individuals ages 18 to those in their early 30s, the millennial generation may be well-educated and digitally savvy, but they face mounting financial pressures, especially when it comes to student loan debt and lower employment opportunities today.
On average, student loan debt sat at approximately $30,000 per borrower in 2012, according to data cited by CNBC. Simultaneously, the cost of higher education soared, in turn creating $1 trillion in outstanding student loan debt, just as 84 million millennials were maturing and preparing to join the workforce.
“These circumstances have created a frustrating challenge for this generation: How do you live as an independent adult and, at the same time, save for the future and retirement?” writes CNBC contributor Cathy Curtis, an independent certified financial planner, founder and owner of investment advisory firm Curtis Financial Planning.
For many in this demographic, the answer has been to move (or stay) back home with mom and dad, or resort to shared living spaces with multiple roommates in efforts to save on rent.
But even with these cost-saving approaches, millennials still face the dilemma of deciding whether they should put their income toward retirement plans, pay down student loans or save for a more independent living situation.
Saving the maximum amount of $17,500 in a 401(k) plan may not be possible for many millennials, Curtis writes, referencing a Fidelity survey that found 44% of job changers in their 20s cashed out either some or all of their 401(k) plans, while 38% of job switchers in their 30s also did the same.
“It makes no sense to contribute to a 401(k) if the money is withdrawn a few years later, accruing taxes and penalties that eat away at savings,” Curtis writes. “What is imperative, however, is at least making a contribution to earn the company match, if there is one.”
Read more at CNBC.
Written by Jason Oliva