The median Millennial has saved exactly $0 for retirement—a startling statistic. While retirement may be in the distant future for the generation of American workers born since 1982, saving early is important because that money has the most time to realize the benefits of compounding interest.
The problem is not just that young people in general save less than older workers because they earn less—it is that young people today are actually saving less than their parents did at the same age. In 2010, people under the age of 40 had saved about 7 percent less than Americans in their 20s and 30s in 1983. And young people are saving at a lower rate than experts recommend: While financial planners recommend setting aside at least 10 percent of income for retirement, workers under the age of 34 are putting away just 5.5 percent, according to a recent survey.
This does not bode well for Millennials’ long-term financial security. Social Security will be there for Millennials, but it was never intended to be Americans’ only source of income for a comfortable retirement. Personal savings and workplace retirement accounts were supposed to fill the gap. But today, millions of Americans—including the nearly half of all Baby Boomers and Gen Xers who the current system is also failing—are expected to fall short in private retirement savings. Not surprisingly, just one in five young people reports that they are very confident they will have enough money to live comfortably throughout their golden years.
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