The advice is freely given that the younger you start saving for retirement, the better. If you start saving in your twenties, you can easily have over a million saved by the time you retire in your sixties.
But Millennials are struggling to follow this advice. Struggling more than the Boomers and Gen Xers did when they were in their twenties. And it’s not for the reasons you might think.
A recent survey reported that although the student debt of Millennials is a reason for not saving for retirement that far exceeds the other groups, it’s not nearly the highest ranking. Housing costs are the number one response for Millennials. This answer was chosen by 37% of those who participated in the survey.
This chart shows the results of the survey. You can see how housing costs for Millennials topped their reasons for not saving for retirement.
And it’s no wonder. If you’ve looked at the housing market around you or across the country, you may have noticed the jump in rental rates, the lack of affordable housing and construction demand.
Across America, most rental rates have increased. The average monthly rental rate for a two-bedroom unit was $1809 in 2019. Housing to income guidelines say you should pay around 30% of your income for rent or housing. In a higher-priced market, that should top out at 40%.
Another report said one in five of millennials are paying 50-59% of their income for housing expenses, making saving for retirement nearly impossible. An additional 8% are paying between 60-74% for housing.
Other things keeping Millennials from investing, as shown on the chart above, include supporting family members financially, inadequate income, healthcare costs, spending on non-discretionary items and student debt.
Although many in the media would have you believe that Millennials need financial help from their parents, one study “found that one in five millennials help support their aging parents.” And the amounts they gave were more than $18,000 a year!
Even with all of these reasons for not saving for retirement, one of the biggest reasons may be not knowing how to invest or where to start saving for retirement. iFlip has a simple solution.
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