Is Your Retirement in Jeopardy?

by Miranda Marquit · 0 comments

One of the issues that comes up over and over again is retirement. For those concerned about money, retirement is a very big problem to confront. Indeed, some think that Millennials aren’t going to be much better off than those in Generation X.

According to a recent study conducted by Nerd Wallet, Millennials will have to keep working until they are 73. On top of that, the student loan debt that they rack up is expected to take money out of their pockets in the long run.

Will Your Student Loans Ruin Your Retirement Prospects?

The study indicates that Millennials will lose about $115,000 for their retirement accounts due to the average student debt load of $23,300. By the time the debt is repaid with interest, and the money that would have been earned, had it been invested, is added up, it seems a bit costly.

However, this doesn’t necessarily follow that your retirement prospects are completely ruined by your student load debt. Two of the things to consider in your calculations include:

  1. Are you setting money aside? Even if you are repaying student loans, the reality is that you might still be earning a return. If you are setting money aside for retirement, even as you make student loan payments, you are still receiving the advantages associated with compound returns. How fast you pay of your student loans should be based on your overall returns. If your student loan interest is fairly low, and your annual returns from your investments higher, there isn’t a lot of reason to stop investing just to pay down your student debt a little faster.
  2. Did your education result in higher pay? Another consideration is whether or not your education has resulted in higher pay over time. Were you able to develop the skills and expertise to receive higher pay? If so, that college debt might be worth it. While it’s better to gain an education without going into debt, the reality is that if you can boost your earning power significantly with the leverage provided by a student loan, that might overcome the fact that you could miss out on $115,000 for your retirement. What’s a little more than $100,000 if you manage to accumulate $1.5 million for your retirement over the years? You’re still likely to do just fine.

Do You Really Plan to Stop Earning Income Altogether?

Also keep in mind that many of these studies, while interesting, assume that everyone is going to work until a certain age and then suddenly stop working to live in some sort of retirement. The reality is that many Millennials are starting to chart their own courses. They are able to make money on the side with the help of the Internet. It’s possible to create passive income sources, and anyone has access to the stock market. It’s possible to travel now, and live a good lifestyle now, enjoying youth. At that rate, who cares if you have to get a part-time job in your 70s? You’ve already enjoyed life to the fullest before getting to that point.

What do you think? Will you work until you’re 73? Do you have plans to live your life a little differently than the work until you retire model?

Bonus Tip:

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