Center for American Progress

Why Millennials Aren’t Saving for Retirement—and What We Can Do to Change That

Why Millennials Aren’t Saving for Retirement—and What We Can Do to Change That

Millennials are saving less for retirement than older generations, threatening the long-term financial security of the youngest generation of American workers.

A mother and child sit on a bench in Central Park amid the COVID-19 pandemic, New York, May 2020. (Getty/Alexi Rosenfeld)
A mother and child sit on a bench in Central Park amid the COVID-19 pandemic, New York, May 2020. (Getty/Alexi Rosenfeld)

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.

Without a doubt, the current retirement system is failing the youngest generation of American workers. Below are the top four reasons Millennials are not saving for retirement—and what we can do to change that.

1. High youth unemployment

For too many Millennials, the reality of the post-Great Recession economy is unemployment. After 52 consecutive months of job gains, the economy is on the path to recovery. But youth unemployment is still too high: 8.5 percent of recent college graduates are unemployed—and that number rises to 16.8 percent when including those who are working part time but want a full-time job. For recent high school graduates, the situation is even bleaker: 22.9 percent are unemployed and 41.5 percent are underemployed.

The after effects of being unemployed are significant and long lasting. Economists have found that young people who are unemployed for six months or longer earn about $22,000 less than expected over the next 10 years as a result of having a deficit in experience—and lower wages mean lower savings for those who were once unemployed.

To get young people into jobs today, prevent long-term scarring, and boost savings rates, lawmakers should immediately invest in broad-based job creation, support summer jobs for youth, and increase access to earn-while-you-learn training by expanding apprenticeships.

2. Stagnant wages and the middle-class squeeze

Even Millennials with jobs are feeling what is known as the middle-class squeeze: nearly flat wage growth paired with the rising cost of goods and services such as health insurance and college tuition. For example, the real cost of college has increased 250 percent over the past three decades. With less income but costlier expenses, Millennials are hard pressed to save not only for retirement but also for any sort of big-ticket item.

Policymakers should ease the squeeze by strengthening the middle class. This means protecting workers’ right to organize for better wages and benefits, guaranteeing paid family and medical leave so Millennials can care for their loved ones without fear of losing their jobs, and increasing the minimum wage to give millions of Americans a raise.

3. Massive student debt

The Consumer Financial Protection Bureau reported in 2013 that the burden of student-loan debt had clocked in at about $1.2 trillion for the first time, including at least $1 trillion in federally backed loans. Today, the average college graduate with student loans still has to pay off $26,600 to get out of the red. According to one analysis, couples with student loans from college will lose $134,000 in retirement savings over their lifetimes as a result of that debt.

The student debt crisis is a long way from being solved, but President Barack Obama’s recent executive actions on student debt are positive steps. Congress also has the power to do more by passing Sen. Elizabeth Warren’s (D-MA) bill to help college graduates refinance their student loans.

4. Poor-quality retirement plans

Less than half of American workers are offered retirement plans at work, and fewer than ever are being offered defined-benefit pension plans. Unfortunately, the ubiquitous defined-contribution plans—think 401(k)s and individual retirement accounts, or IRAs—are inadequate substitutes. Unlike the guaranteed level of retirement income from defined-benefit plans, income from defined-contribution plans is dependent on how much a person saves and whether or not their employer contributes. But too many Millennials lack access to any kind of work-based retirement plan at all; just 40 percent of workers under the age of 35 have a retirement plan at work.

To address the poor quality of retirement plans, the Center for American Progress has proposed the Secure, Accessible, Flexible, and Efficient, or SAFE, Retirement Plan—a collective defined-contribution plan that builds on the 401(k) model but is less costly, less risky, and open to all workers. It’s also possible to make it easier for young people to save for retirement by opening up the Thrift Savings Plan for federal employees to the public and making information about 401(k) fees more transparent.


Millennials’ future economic security depends on their ability to put away a portion of their current paychecks for retirement. Millennials know that saving for the future is important, but too few are able to do so. Fortunately, there are smart policies we can enact today to make it easier for young people to save and build a 21st century economy that works for the middle class.

Ben Schwartz is an intern with the Economic Policy team at the Center for American Progress. Sarah Ayres is a Policy Analyst on the Economic Policy team at the Center.

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