Living with credit

Millennials still aren’t saving enough for retirement

Kelly Dilworth

I’m supposed to meet with a financial adviser next week to go over my retirement savings — which are so embarrassingly low I cringe each time I look at a statement — and I’m already itching to cancel.

I’ve been putting off this appointment for more than a year now and have been avoiding thinking seriously about retirement for as long as I’ve been out of school. (I graduated more than seven years ago, just before the financial crisis.)

Millennials still aren't saving enough for retirement

Rather than dutifully sock away cash in a retirement fund, I spent most of my mid- to late 20s scraping up just enough cash to get by without dipping too far into credit card debt and put whatever money I had leftover into an easily accessible savings account — just in case I had an emergency.

I knew in theory it didn’t make much long-term sense to hoard money in a savings account that was earning next to nothing in interest, and I planned to contribute more to my retirement — eventually. But I was also painfully aware that, in this economy, I could lose my job at any moment and struggle to replace it. I wasn’t ready to part with the extra security of having as much cash as possible on hand — just in case. (I did at least take advantage of my employers’ matching retirement contributions. But, most of the time, I put in as little income as possible and otherwise ignored my account.)

Now, I’m reaching 30 — financially better off, but still insecure enough to worry about the economy — and am deeply regretting the number of years I spent neglecting my account.

According to a new survey from Wells Fargo, I’m not the only one.

Millennials shorting retirement
Eighty percent of millennials say the Great Recession taught them the value of saving for a rainy day, according to Wells Fargo’s 2014 millennial study. But nearly half the millennials surveyed (45 percent) said they aren’t saving anything for retirement. The survey included was conducted by Harris Poll and included more than 1,600 U.S. adults in the millennial generation, ages 22-33.

Among those who have yet to save a dime, 84 percent say they’re slacking on their savings because they can’t afford to put anything aside.

As for those who are saving at least something for their golden years, few are saving more than the bare minimum. For example, only 31 percent are saving 6 to 10 percent of their yearly income — and just 18 percent are saving more than that.

Financial advisers frequently recommend young people save at least 10 to 15 percent of their income to ensure a comfortable retirement. But when you’re just starting out and juggling a hefty student loan with car payments and other expenses, socking that much money away can feel like a tall order — especially if you’re also trying to build up some kind of emergency fund.

According to the same survey, 42 percent of millennials say that paying back their debts is currently their greatest financial worry, while 40 percent say that the amount of debt they already have is “overwhelming.” Meanwhile, 47 percent say that at least half of their monthly paycheck goes directly toward their debt. And 56 percent say they’re currently living “from paycheck to paycheck.”

It’s no wonder then that so many millennials are struggling to save for a financial life that’s still several decades away. When you only have a small amount to spare, it makes sense to keep at least some of that money liquid, since you never know what’s around the bend. As Wells Fargo’s Karen Wimbish noted in a press release, “The silver lining of the recession that started over five years ago is that a majority of millennials get that saving is a necessity and even equate it with ‘surviving’ tough times.”

Where you can get yourself into trouble, though, is if you make the same mistake I did and hoard more cash than you need. The emergency savings that I carefully built up throughout my later 20s may have saved me from going into debt for unexpected expenses, like pricey car repairs. But it also prevented me from investing more aggressively at an early age. As a result, I’ll likely have a lot less money to retire on than I would have otherwise and will have to be more aggressive over the next three decades to make up for it.

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