Today's College Grads Won't Be Able to Retire Until They're 73

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Mountain of money
Alamy
Sorry, recent college grads: That mountain of student loan debt you have to scale is going to delay your retirement by more than a decade.

That's the conclusion of an analysis by personal finance site NerdWallet, which looked at the dismal financial state of today's average college graduate. With a median debt load of $23,300, a 10-year repayment plan and an unemployment rate of 18 percent upon graduation, new grads aren't exactly set up to start socking away retirement funds. It all translates to about $115,000 less in your retirement fund by the time you hit the typical retirement age.

So how does $23,000 in college debt now wind up costing you $115,000 later?

It's partly a matter of interest on the loan, which winds up costing the typical grad an additional $5,000 or so by the time the debt is repaid. But the real issue is opportunity cost.

"[A]lthough 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," writes NerdWallet analyst Joseph Egoian. "This prevents any meaningful contributions toward retirement."

Now, if that $28,580 being doled out in loan payments instead sat in a plain-vanilla retirement account averaging a 5 percent annual return for 33 years, it would become more than $143,000.

But it won't, and as a result, the typical debt-laden college graduate won't be well-situated to retire until he or she is 73 -- a good 12 years later than the current average retirement age. Even with a projected life expectancy of 84, that's still only a decade of retirement to enjoy.

Later retirements are somewhat inevitable, even in the absence of exploding student loan debt -- as medical science extends our lifespans, you'll have to work longer simple give yourself a shot at not outliving your money. That's why it's more important than ever to contribute as much as possible to your retirement accounts and take full advantage of any employer matching you can get on your 401(k).

Even with tuition growth starting to slow, it's tough to avoid graduating college with a heavy debt load. But you don't have to follow the crowd into a seriously delayed retirement: Being smart about your education can help you get there right on schedule.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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