Dear Recently Graduated Millennials: Prepare To Work Until You Are 73

Tyler Durden's picture

Our advice to recently graduating Millennials? Live long.

Because according to a just conducted analysis by NerdWallet, looking at the future of the average recent college graduate, and more importantly looking at the mountain of student loans each graduate will be saddled with and the implications for the earliest possible retirement age onset, Millennials may well have no choice but to postpone their retirement by about a decade, to the ripe old age of 73.

The reason for this, of course, is the magic of compounded interest: that "manageable" debt load grows and grows and grows even assuming one dutifully pays interest on time. And with unemployment at graduation running at 18%, that is a rather generous scenario. Still, even under base case assumption, the median student loan of $23,300 will end up costing students over $115K by the time they retire.

What does that mean in practical terms? "When will students be able to retire given that many are spending the first ten years (or more) of their careers paying off their hefty loans? NerdWallet... found that while retirement is certainly not impossible, for most it will have to wait until their early to mid 70s— over 10 years later than the current average retirement age of 61." It goes without saying that all else is assumed equal. Alas, in the America's welfare state future, few things will be equal, and most things will be far worse.

Which, one wonders, may be the secret plan after all: since by now everyone knows that the US' welfare state is unsustainable for the mid- and certainly long-term future, what better way to avoid draining it, than to force those who would otherwise benefit into at least ten more years of work to pay off debts accumulated over 50 years earlier.

Quite a brilliant strategy when one thinks about it. And to think, all that was required was record low interest rates, fooling everyone into believing all those tens of thousands of dollars of debt, was cheap.

From NerdWallet

Key Takeaways:

  • Most of today’s college grads won’t be able to retire until 73 due to high debt load —12 years later than the current average retirement age
  • Given a life expectancy of 84, grads will only have 11 years to enjoy retirement
  • The median debt load of $23,300 will cost students over $115,000 (in today’s dollars) by the time they retire
  • Employer 401(k) matches are crucial, and will compose 50% of retirement savings

Student Debt Will Follow Graduates To Retirement

With the total amount of outstanding student debt approaching $1 trillion, the plight of debt-straddled college students is more important than ever. In the past 30 years, not only has the number of high school graduates enrolled in four-year universities increased by 11%, but college tuition has also soared over 200%. As more students attend college at a cost higher than ever before, Millennials have increasingly turned to loans to help finance their education. While much of the college debt dialogue is over immediate issues like employment and repayment, there is another glaring challenge that graduates will have to deal with for years to come: retirement.

When will students be able to retire given that many are spending the first ten years (or more) of their careers paying off their hefty loans? NerdWallet conducted a study that examined the financial profile of a typical college graduate and found that while retirement is certainly not impossible, for most it will have to wait until their early to mid 70s— over 10 years later than the current average retirement age of 61.

Quick Facts On Students And Their Debt

Here are some quick facts to give context on exactly what students are grappling with:

  • Median debt for a student upon graduation: $23,300
  • Percentage of students who are unemployed at graduation: 18%
  • The median starting salary for those who do have jobs: $45,327
  • Standard loan repayment plan: 10 years
  • Average yearly loan repayment: $2,858
  • Number of college graduates currently estimated to be in default: Over 7 million

$23,300 In Loans Ends Up Costing $115,096 By Retirement

The goal of the study was to find realistic retirement projections for the typical college graduate and create projections that applied to a broad range of students. The study compared three different financial profiles: the median graduate, with median debt and salary; the struggling graduate, with high debt and a below average salary; and well-off graduate, with low debt and an above-average salary.

Graduate Retirement Outcomes

Clearly, student debt has an impact on retirement outcomes. Currently, the average retirement age is 61. But for most of today’s college grads, the realistic retirement age will be closer to their mid-70s. Given an average life expectancy of 84, this will leave only 10-12 years for people to spend in retirement. The main reason for this is that although the median college graduate leaves with a seemingly manageable $23,300 debt load, 7% of a student’s earnings go toward yearly loan payments of $2,858 for the first ten years of his or her career. This prevents any meaningful contributions toward retirement. In fact, by the age of 33, when the typical college grad has finally paid off their standard 10-year loans, he or she can only be expected to have saved $2,466 for retirement—over $30,000 less than if the student had graduated with no debt. Even worse, the foregone savings carry a serious opportunity cost, as this money would have been earning a compounded rate of return every year until retirement. At the projected retirement age of 73, the lost savings directly attributable to student debt is $115,096, nearly 28% of total retirement savings.

Surprisingly, for the struggling graduate, the retirement outcome isn’t dramatically different. Despite being in nearly twice as much debt and starting with 10% less pay, the expected retirement age is still just 75, only two years later than the median case. The main reason for this is social security. Much has been discussed about whether or not social security will be around by the time Millennials retire. To be conservative, social security benefits are factored into the study at $11,070 (75% of current average) per year beginning at age 67. That said, a substantial reduction in benefits or the disappearance of the program altogether would significantly alter the retirement equation. If the current social security payouts were to remain unchanged for the next 50 years, the benefits would provide future retirees a significant boost by covering nearly 15% of their required yearly income in retirement.

Well-off Grads Retire 7 Years Earlier

The retirement prospects for the well-off grad are significantly better than the others as illustrated in the graph above.  By graduating with a reduced debt load and landing a job that pays 22% more, the well-off grad can expect to retire at age 67. This is a huge departure from the other cases, and demonstrates the importance of contributing to a retirement plan early on in one’s career. Compared to the median grad, the extra $40,406 that the well-off graduate is able to contribute during the first ten years of his or her career results in a $446,452 difference in retirement savings by age 73.

So How Do You Beat The Odds?

Given these circumstances, should students resign themselves to an eternity of work with little to look forward to in their latter years? Not necessarily. Though an increasing retirement age does appear to be an inevitable economic reality, being conscious of this problem and tailoring financial and career planning accordingly can go a long way toward achieving retirement objectives. There are many factors that influence the ultimate age at which people are able to retire, but there are a few variables that have a particularly large impact. Making above-average yearly contributions to a retirement account, working for an organization with a decent 401(k) match, and making sure to invest money in index tracking mutual funds are three ways to help add years to retirement.

Employer 401(k) Match Is Crucial

As fewer and fewer companies offer defined benefit plans, Millennials will have to depend upon employer 401(k) plans to save for retirement. According to a recent Fidelity survey, the current median yearly matching contribution is $3,420. As shown below, these employer contributions are expected to make up roughly 50% of the retirement equation for Millennials. By working for a company that offers a yearly matching contribution of $4,420 ($1,000 more than the median), potential retirees can reduce their expected retirement age by up to three years.

 401(k) Match Composes Half of Retirement Savings

Make Above-average Contributions To Retirement Accounts

While working for a generous employer can do wonders for retirement, not everyone is in a position to be overly selective about whom to work for. Another important component of retirement planning is the yearly contribution rate. Making above-average contributions can significantly improve retirement outcomes. Though the study projects a 6% annual post-tax contribution (the average personal savings rate for Americans), increasing that number to 10% reduces the expected age of retirement from 73 to 69.

Invest In Index Funds

Contributing money towards retirement won’t be helpful if the money is simply left in a savings account or a CD. To earn a return, Millennials need to be willing to take some risk and construct an equity-oriented portfolio. This may be difficult for today’s grads who have seen the stock market seemingly implode every five years, but unfortunately, retirement will be impossible if people invest too conservatively. The study assumed a 6% yearly return on retirement savings which is a conservative figure given the historical performance of the market. That said, it is a rate of return that can’t be achieved by completely avoiding equity exposure. The best way for an individual to overcome this problem is by investing in index tracking mutual funds, which will offer a market return with low fees.

Retirement Isn’t Hopeless, But It Will Be Difficult

Far more than their parents, Millennials will have to rely upon proactive financial management to achieve their retirement goals. Each generation is afflicted with distinctive financial ills, but the challenge of college debt is unique to Millennials. The decline of pension plans, the uncertainty surrounding social security and the college debt epidemic have placed the onus on graduates to make conscious, forward-thinking decisions about their retirement.


Future retirement statistics were projected by profiling three potential situations that students might find themselves: the median graduate, with median student debt and median starting salary; the struggling graduate, with a high debt load and a below-average salary; and the well-off graduate, with a low debt load and an above-average salary. The study factored in a range of other relevant variables to create the projections: average 2012 social security benefit, average 2012 401(k) match, 30 year average national salary growth rate, 30 year average inflation rate, 30 year annualized S&P 500 returns, life expectancy, 30 year average personal savings rate, 2012 Stafford loan interest rates, and standard loan repayment terms.

All projected figures are inflation adjusted and discounted back to 2013 dollar-terms.

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Cognitive Dissonance's picture

Not to worry. 73 is the new 53 (or will be).

<Hell, you're just getting started at 73. You haven't even found your (first) trophy wife/husband yet.>


fonzannoon's picture

The millenials may work until they are 73 but they get to hang out and chill until the boomers drop dead and some jobs open up. But we all know that by that time automation will have axed all the boomers jobs anyway. So the millenials will never actually work.

NOTaREALmerican's picture

Re:  So the millenials will never actually work.

Sounds like utopia has been finally achieved.  

max2205's picture

On what interest rate...these numbers are worse than CBO or pension funds make believe

max2205's picture

Also now 2011 workers to FSA was 1 to the time they hit 73 it'll be 1 worker for 3 in the FSA so workers will be taxed 60 to 70%  making it extra hard to retire on 150k in debt....Welcome to France/Hell

Fukushima Sam's picture

Live long... and prosper?

Oh, sorry, that was the Boomers.

James_Cole's picture

At the current suggested rates of tech evolution, by the time they're 73 the amount of 'workers' (in the traditional sense) needed worldwide will be a rounding error of zero. 

AldousHuxley's picture

technology won't solve non-material needs like zero-sum game of status.

also technology tend to make humans value non-tech more.....annual price&maintenance of a horse versus 200hp automobile.

Paveway IV's picture

Maybe not solve those, but someone will eventually come up with an app for keeping score easier (wth integrated GPS and animated avitar).

I'm a lot more worried about material needs, particularly infrastructure. The current highway system's bridges need repair. My retirement plan involves a small but comfortable cardboard box under one of those structures. I don't want the thing collapsing on me while I'm slow-roasting the day's rat catch over a burining tire from my scooter.

EscapingProgress's picture

I'm one of these so-called millenials. I will not marry. I will have no children. I will not purchase a house for more than $75k (probably will end up building it myself). So, when do I retire?

Louie the Dog's picture

So the millenials will never actually work.

I'm guessing that by putting Obama in office twice they never intended on working.

Chuck Walla's picture

That's not fair! Obama needs to smooth that curve so everyone can retire at the same time. Take savings from the well off and give it their struggling frat bros.



NOTaREALmerican's picture

And listen-up you young wipper-snappers,  keep your socialist hands off my Medicare.   I'm entitled to that government motorscooter.  If you want to cut the government try cutting that immoral socialist welfare all the fornicatin' harlots with haunted vaginas are living off of.  


(Haunted vaginas: )


fonzannoon's picture

Can you imagine what it will be like when a decade full of college grads stuff with loans gets tired of hearing lectures from their parents and society about what they are supposed to to and be? 

Louie the Dog's picture

Can you imagine what it will be like when a decade full of college grads stuff with loans gets tired of hearing lectures from their parents and society about what they are supposed to to and be?


DIgnified's picture

"...or we're shipping you off to military school with that goddamn Finkelstein shit kid!"

Louie the Dog's picture

And listen-up you young wipper-snappers,  keep your socialist hands off my Medicare.


Yep, I just qualified for Medicare so keep paying just like I did for 47 years (and still am) and maybe you'll get your's.  Probably not, though.  Oh well.

Winston Churchill's picture

Live long and fester.

Apologies to Mr.Spock.

RafterManFMJ's picture

No worries, once they can transplant your brain into a metal robotic shell, you can work ... forever!

Relentless's picture

Screw that! Load up on debt, live fast, die young, leave a good looking and debt-ridden corpse.

That way you screw the banks and you screw those old, greedy bastards who created all this national debt in the first place and now expect to live off of your taxes.

infinity8's picture

I missed my window of opportunity, dammit.

NOTaREALmerican's picture

Re:   That way you screw the banks and you screw those old, greedy bastards who created all this national debt in the first place and now expect to live off of your taxes.

It's irresponsible young commie bastards like you that have ruined this great and glorious country.

You-n-them fornicatin' harlots with haunted vaginas are why our enemies are winnin' !!

atomicwasted's picture

Invest in index funds???  Ha, ha, ha!

shovelhead's picture

"Go tell Jimmie to drain and clean the fryolator."

"Uh, Sir...I think Jimmie's dead. You better go look in the bathroom."

"What? He was only 73...he was going to retire next week."

"Well, I think he's retired already."

ElvisDog's picture

6% annual return, per year, every year for the next 50 years. With no recessions, stock bear markets, or gaps in your employment. Good luck with that Millenials....

NOTaREALmerican's picture

Re:  With no recessions, stock bear markets

If you say your "Keynesian" prayers every night,  the Fed will provided for all your financial needs.   Let us pray:

We must borrow more money,
To stimulate demand,
So that jobs are created,
And prosperity ensues,
Then we pay off our loans.

For ever and ever, in his holy bearded name, Amen!  

max2205's picture

Parents now should avoid hot tubs and the accidents waiting for them so the kids can acquire' the house....just saying

RmcAZ's picture

And most (if not all) of the 6% is taken away by inflation.

Yancey Ward's picture

And plan to start working at 33.

alien-IQ's picture

Given the state of things, wouldn't it be more accurate to say "prepare to LOOK for work until you're 73"?

Surging Chaos's picture

As a millennial, I am not expecting to retire at all.


@ S CHAOS                As an old guy over 60, I'm not expecting to retire at all either thanks to you and the other millinnial shitforbrains who voted for Obomao...........THANKS ALOT !   

czarangelus's picture

Gimmie a break, old man. Everyone over the age of 40 should be gassed and then rendered into heating oil for the wars and debt they allowed presidency after presidency to embroil this country within.

Yenbot's picture

We'll be resisting that, punk...


They made a movie for asswipes like you.......Logan's Run.... catch it some time and say to yourself, I'll be 36 someday soon and then it's over. You see, they didn't have the option of reaching 40. Careful what you wish for kiddies................................just sayin.

WallowaMountainMan's picture

too linient, imho

it is unlikely, hopefully, that there has been a genreration that comes up short as my generation did. we were on target in the '60s and now, can't even stop our own from destroying us.





that let's no one off the hook. not even you. it's just fact of the matter. grow a set and practice not preach.

'cause preachin'  is my job.



Vendetta's picture

"Everyone over the age of 40 should be gassed and then rendered into heating oil for the wars"

No worries for that, the employers have been doing that to older workers for decades now... they'll tell you that you are too expensive, not 'flexible' enough (because you take time off to take care of a sick kid) and a plethora of other excuses.  Then they fire all of you and your coworkers after working you like a dog for years and move operations to some other 3rd world nation to be more 'competitive'.   This has been the situation for older workers for a long time and waits for you

torabora's picture

I snickered when my dildo boss referred to me as that 'old guy'. I was 58....he is 10 years younger. I retired...the fuck is still deep in debt and working.

Surging Chaos's picture

#1: I voted for Gary Johnson in 2012. Wrote in Ron Paul in 2008.

#2: It didn't matter who was going to be president when Obama was elected 2008, because the country was already finished. That's what 40 years of fiat currency and 100 years of the Fed will do, regardless of who's in office. Obama is simply accelerating the collapse.


You must have parents with some idea of how things work and passed it on to you. Most of the millinnials ARE shitforbrains , you are the exception. SAD BUT TRUE.  BTW, it really does not matter who you voted's who counts the votes. 

the grateful unemployed's picture

how many months of unemployment benefits is that?

Frank N. Beans's picture

yeah right, put as much as you can into your 401K and watch it shrink to a 101K. 

anyway my employer matches zilch on it.



Race Car Driver's picture

If everyone just put a little into BitCoin now ... .

silverserfer's picture

Bitcoin, the ponzi for hipsters. 

Bunga Bunga's picture

With that demographics the 401k won't blow up?

Winston Churchill's picture

You mean Obozo Fairness Bonds tm ?

Not to worry, they will be worthless by then.

Boondocker's picture

Or bullets guns and gold.....

1989's picture

No escape from the debt. Buy SLM?