The Class of 2015 should be well on their way to starting their first jobs and settling into adulthood, but hopefully the graduates are comfortable with their chosen career path because according to a new study they may not be able to retire until they’re 75 years old.
An analysis from NerdWallet found that extreme student loan debt and increasingly high rents will have these budding worker bees soon turning into corporate slaves clocking in well into their 70s.
According to NerdWallet’s data, the average student loan debt is $35,051, but with the median salary for an average 23-year-old graduate starting at $45,478, college graduates will not be able to retire by today’s average age of 62. With student debt skyrocketing by more than $5,500 in 2012 when it was $29,400, young working professionals will have larger monthly student loan payments causing them to spend their earnings paying off debt rather than saving for retirement.
“The student loan crisis is not only affecting new graduates’ immediate financial situation, it’s making their retirement prospects dwindle,” Kyle Ramsay, investing manager at NerdWallet, said in the report. “Based on our findings, higher loan payments have the potential to reduce nest eggs by 32%. That’s nearly $700,000 in this scenario.”
“Graduates are being forced to shell out more money,” Ramsay said. “This puts them in a tough position because not only are they unable to save early, but they’re losing out on earning interest on those savings.”
Rent has gone up by 11 percent nationally since 2012, according to Zillow’s research cited in the report.
NerdWallet advises millennials to start saving early, suggesting even just 10 percent annually could save you enough to retire by 70 instead of 75.
But while being mindful and adapting to these economic changes can benefit graduates, the study’s results highlight the larger societal problem at hand of young professionals earning less coupled with daunting student loans and the high cost of housing forcing college graduates to sacrifice retirement savings (or even just a savings account) to spend more on living.
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