Saving For Retirement Stalls For Younger Generations As Cost Of Living Soars

Younger generations are having a hard time saving for retirement as the cost of living soars across the U.S., possibly leading to an increase in the average retirement age.

Inflation is at its highest rate in 40 years, leading to a significant rise in the cost of living. Younger generations entering renting, homeownership, and the workforce have already dealt with the pandemic and previous economic troubles, for some, including the 2008 financial crisis.

“[Millennials] entered the workforce at a time of depressed wages, high levels of unemployment, and major structural changes in the American economy,” read a study, titled “Millennials and Retirement: Already Falling Short,” from the National Institute on Retirement Security.

The same applies to Gen Z, many of whom graduated during the pandemic.

It is not as if these age groups, specifically Millennials, are not saving or attempting to save, the problem is that the younger generations are behind in earnings, labor force participation, marital status, and homeownership. Older generations met these indicators much earlier in life than their Millenial and Gen Z counterparts.

Especially because of the pandemic and earlier economic troubles, many Millenials and Gen Z entering the economy as adults are facing higher costs.

Plus, more so than in the past, undergraduate degrees have less power in the jobs market, with new graduates having a lot of difficulties finding jobs and taking on lower-paying jobs. Millennials also have high amounts of student loan debt, and it is difficult to save money while paying off debt.

“Currently, two-thirds of working Millennials have zero—not even one dollar—saved for retirement,” the study from the National Institute on Retirement Security read. “Only five percent of working Millennials are saving enough for retirement.”

In addition, most employers offer fewer benefits, like 401k options for employees, so that impedes Millenials’ and Gen Z’s ability to save for retirement, according to CNBC.

“Millennials’ lack of wealth in their 30s relative to earlier cohorts should be a source of great concern, given that they will live longer than previous cohorts and will receive less support from Social Security,” read a study, titled “Millennials’ Readiness for Retirement,” from the Center for Retirement Research at Boston College.

The Social Security Administration is considering raising the age of retirement to 67, but some experts told CNBC that the age could go even higher. Since Millenials and Gen Z are planning on living longer than their parents, that means less support from the government later in life and a longer time spent working.