Thanks to hefty student loan debts, many millennials will have to wait until 73 to retire, a recent study found. That’s 12 years later than the current average retirement age, 61.
Joseph Egoian, a financial analyst for personal finance website NerdWallet and the author of the study, explains that 73 was the age by which a college graduate with a median amount of student debt and a median starting salary would finally build a big enough retirement portfolio to replace 80% of his peak salary annually. (Also factored in are Social Security benefits beginning at 67, at $11,070 a year.) Read the full report here.
Here’s the problem, according to NerdWallet: The median debt for a student when she graduates is $23,300, and the median starting salary for a recent grad (who has a job) is $45,327. Assuming a student makes the average annual loan payment of $2,858 for the first 10 years of her career, that drastically cuts into the amount of retirement saving she can manage. And figuring that missed-out contributions could have been earning a compounded rate of return until retirement, the lost savings due to student debt payments is $115,096 by age 73, according to the report. The report assumes every loan payment would have gone to retirement savings, and that the graduate would save at the historical 30-year national post-tax savings rate of 6.1% after the debt is paid off, Egoian said.