10 Ways Millennials Will Waste Money in Retirement

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Whether millennials will have enough money to last them throughout their retirement remains to be seen. So far, things aren’t looking great for this generation.

According to a 2022 survey by Goldman Sachs, 34% of millennials feel behind on saving for retirement. Factors making it difficult to build up a sufficient nest egg include towering student loan debt and the high costs of housing and child care.

But it’s not just saving for retirement that millennials must do; saving during retirement will also be critical. As it stands, millennials have some issues to work on in order to not waste money in their golden years. Let’s explore the 10 (totally reversible) ways millennials will waste money in retirement.

Lack of Budgeting (and Specifically Budgeting for Saving)

A budget is necessary for tracking your expenses and ensuring you save appropriately and don’t overspend, but many millennials aren’t taking the time to make budgets and stick to them. This habit will hurt them now and down the road in retirement. 

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“Budgeting is critical,” said Robert R. Johnson, Ph.D., CFA, CAIA, professor of finance at Creighton University’s Heider College of Business. “Specifically, one should not simply budget and track expenses, but one should budget for savings. Warren Buffett is quoted as saying, ‘If you want to make saving a priority, take a look at how you budget. Do not save what is left after spending; instead spend what is left after saving.’

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“If one truly wants to make savings a priority,” Johnson added, “it cannot be a residual. It should be a line item on your budget.” 

Lacking a Plan

Got no budget? You’ve probably got no plan for your retirement either. This is another problem that will lead many millennials to waste money when the eventual end to their working days arrives. 

“Without a plan, [millennials] may be more likely to make impulsive decisions with their money, rather than making measured and informed decisions that can help them reach their retirement objectives,” said James Allen, CPA, CFEI, founder of Billpin.com

Spending Too Much on Lifestyle

Everyone likes to live well; but, as we learned from Gen X, the generation with the highest credit card debt, we have to be very careful about not spending too much on lifestyle, lest we end up spending beyond our means.  

“Millennials who are accustomed to a particular way of life can find it difficult to modify their expenditures in retirement,” said Carl Jensen, founder of Compare Banks. “Although they may not have enough money to sustain their lifestyle, they might nevertheless continue to spend cash on things like leisure, vacations and other nonessentials.”

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High Home Costs 

Hand in hand with a nice lifestyle is a nice home in a desirable locale, but are your digs appropriate for a retirement-sized life?  

“Millennials who opt to live in pricey places can find themselves spending too much on property in their later years,” Jensen said. “Their retirement funds can be depleted as a result, leaving them with less cash for other obligations.”

Continuing To Carry Debt

The average millennial has $27,251 in non-mortgage consumer debt, according to Experian. This high-interest onus could sink them in retirement.

“If they don’t prioritize paying off this debt before retirement, they may have to continue making payments during retirement, which can put a strain on their finances,” said Brian Meiggs, the founder of My Millennial Guide.

Cashing Out Retirement Accounts Early

It can be very tempting to cash out retirement accounts early to cover immediate financial needs, but this maneuver can have serious long-term consequences. 

“Not only will they incur taxes and penalties for early withdrawals,” Meiggs said, “but they will also miss out on the benefits of compound interest and potential investment growth over time.” 

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Failing To Maximize Employer Retirement Benefits 

Quite a few employers offer ample retirement benefits, including 401(k) matching. By not taking advantage of these employer-sponsored programs during their working years, millennials will waste money in retirement.

“Millennials should take advantage of these benefits by contributing as much as they can afford and taking advantage of matching contributions,” said Bailey Schramm, finance advisor at Biz Report

Ignoring Healthcare Costs

Healthcare costs can easily go up as we age, and ignoring these costs or underestimating them can lead to financial turmoil in retirement. 

Percy Grunwald, co-founder of Compare Banks, said, “It’s important to plan for potential healthcare costs, including things like long-term care insurance, Medicare premiums and out-of-pocket expenses.”

Not Planning for Taxes

Some millennials might think their tax burdens will decrease significantly in retirement, but Grunwald asserts that’s not always the case. 

“Depending on your income sources, you may still owe a significant amount in taxes, particularly if you have a high income from sources like rental properties or investment accounts,” Grunwald said. “It’s important to plan for taxes in retirement and work with a financial advisor or tax professional to understand your obligations.”

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Investing Too Conservatively

You want to be protective of your retirement savings, but investing too conservatively can actually make for a waste of money during retirement. 

“If your investments are not keeping pace with inflation, you may not be able to maintain your lifestyle in retirement,” Grunwald said. “It’s important to strike a balance between protecting your savings and earning a reasonable return.”

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About the Author

Nicole Spector is a writer, editor, and author based in Los Angeles by way of Brooklyn. Her work has appeared in Vogue, the Atlantic, Vice, and The New Yorker. She's a frequent contributor to NBC News and Publishers Weekly. Her 2013 debut novel, "Fifty Shades of Dorian Gray" received laudatory blurbs from the likes of Fred Armisen and Ken Kalfus, and was published in the US, UK, France, and Russia — though nobody knows whatever happened with the Russian edition! She has an affinity for Twitter.
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