millennial businessman

Here's the biggest obstacle facing millennials as they play catch-up on retirement savings

Millennials are perhaps the most educated and ethnically diverse generation in U.S. history. They also may be the generation that is least prepared for retirement.

In a recent report, The Center for Retirement Research at Boston College compared millennials (born from 1981 through 1999) with previous generations, using information from the Federal Reserve's 2019 Survey of Consumer Finances.

Besides the ongoing pandemic, which is affecting all generations, millennials are dealing with a number of specific challenges:

  • Social Security will provide less relative to preretirement earnings; 401(k) balances are generally meager; and at any given time, half of the private sector workforce does not have an employer-sponsored retirement plan.
  • They will face much longer periods of retirement because of rising life expectancy; high and rapidly rising health-care costs; and historically low interest rates.
  • Many left school with substantial student debt and began their careers in the tough job market that followed the recession. These factors delayed major life milestones such as getting married and owning a home, and limited their ability to accumulate wealth.

"In short, millennials were behind," according to the authors of the report. "The question is whether they caught up during the last three years before the pandemic."

Millennials entered the labor market during tough times that included the bursting of the bubble and the Great Recession. This experience appears to have been particularly hard on young Millennial men, who had labor force participation rates below those of earlier generations.

The good news is that, by their late 30s, the labor force participation rate for millennial men had caught up. Millennial women seem to have been less affected by the weak economy early in their careers in terms of earnings.

Similarly, homeownership patterns increasingly look comparable to those of earlier generations. Buying a home is highly correlated with getting married, so it is not surprising that as millennials' marriage rate increases with age, so does their homeownership rate. By age 38, more than 60 percent of millennials owned a home, just as their counterparts did in earlier generations.

However, millennials continue to look much different in preparation for retirement. The median ratio of net wealth to income for millennials is significantly behind that for earlier generations, even for households in their late 30s.

The reason for this wealth gap is student loans. Forty percent of millennial households ages 28 to 38 are burdened by student debt and, among these households, the outstanding loan balance amounts to more than 40 percent of income.

Excluding student loans, the median net wealth-to-income ratio for the leading edge of the millennial generation looks similar to that of previous generations. They are saving for retirement, despite the student loans.

"One place millennials have not caught up is wealth accumulation," the authors concluded. "They are saving for retirement at the rate of earlier generations, but student debt is a constant drag on their balance sheet. Millennials' lack of wealth in their 30s relative to earlier cohorts should be a source of great concern, given that they will live longer than previous cohorts and will receive less support from Social Security.

"In short, millennials are well behind other cohorts at the same age in net wealth accumulation, even though they will live longer and receive less from Social Security relative to preretirement earning."

This article was written by C.J. Marwitz from BenefitsPro and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to


  1. Offering student loan assistance can help Black employees
  2. Converting unused vacation time into a student loan debt payment benefit can be a win-win