Are millennials financially doomed?

Jessica Dickler, special to
What millennials should know about social security
What millennials should know about social security

Millennials have more debt and less income than Gen X or baby boomers on average. But those aren't the only financial constraints some face.

New data show 1 in 5 supported an aging parent over the last year, spending an average of $18,250 a year on medical bills and other expenses — more than any other generation, according to TD Ameritrade's recent 2015 Financial Support survey.

That single expense puts a serious strain on their ability to pay off student loans and save for retirement. (Consequently, baby boomer parents have also delayed their retirement plans to help their children financially)

"It's a lot harder to keep your head above water if you have to support family members and still try to tackle your debt," said Matt Sadowsky, TD Ameritrade's director of retirement and annuities.

Should Gen Y count on Social Security?

Additionally, millennials face a challenging job market and lackluster wage growth. About 23 percent of 18-to-34-year-olds are underemployed, according to Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce.

Meanwhile, student loan debt has reached record highs. On average, student borrowers who graduated this year owe more than $35,051, according to Mark Kantrowitz, a student financial aid policy expert and publisher of Paying off debt has made it tougher for many to set money aside.

"Millennials — who should have plenty of time on their side when it comes to long-term investing — are starting off behind the curve. They're putting off saving for retirement because of other financial obligations, a decision that can have unfortunate consequences," Sadowsky said.

In addition to pushing off saving for retirement, nearly half of millennials said they were delaying buying a house, according to the TD Ameritrade survey, which included 1,000 adults age 18 and older. Twenty-nine percent said their financial obligations prompted them to delay getting married and 38 percent said they postponed having children.

Living through the Great Recession from December 2007 to June 2009 and its aftermath has also affected their attitude toward money, said Janet Stanzak, a certified financial planner and principal of Financial Empowerment in Bloomington, Minnesota.

"Because of what they witnessed during the economic downturn, they are being really conscientious before they make big moves," she said. "They recognize how dangerous it is getting in over their head."

Do millennials really have it worse?

But millennials are also more motivated to plan for their financial future and savvy about how to do it, she said.

"They realize they will have to be the [primary] source for their retirement income over their working career," Stanzak said. "There are very few companies that provide pensions today, and Social Security is in question. Their retirement is in their hands."

Although Social Security is likely to remain a source of income for millennials in retirement, albeit a smaller one, the Social Security Administration projects it will have enough money from payroll taxes to cover three-quarters of benefits it has promised retirees after 2034, when its reserves are scheduled to run out . Many millennials say they aren't counting on it.

Nearly two-thirds of millennials surveyed by T. Rowe Price earlier this year said they believe they're more likely to win the lottery than to receive any money from Social Security. And a Northwestern Mutual survey found 73 percent of millennials expect to work past 65 because Social Security won't take care of their retirement needs.

That's not a bad thing, necessarily, said Stanzak, noting that they are quick to take advantage of 401(k) plans and company matches. "This is as important for millennials as it is for everyone."

Still, 4 in 5 millennials said retirement planning was their top financial challenge, according to Lincoln Financial Group's annual Measuring Optimism, Outlook and Direction (M.O.O.D.) of America survey. Indeed, many are not contributing as much as they should.

The rise of auto-enrollment programs and new streamlined sign-up processes have helped draw in more young workers: One report published this spring by BMO Retirement Services, for example, found participation rates among workers 25 to 34 years jumped 22 percent in plans with an automatic-enrollment feature. And for workers under 25, participation in auto-enrollment plans was more than double that of voluntary enrollment plans (29 percent versus 68 percent).

But while advisers typically recommend workers contribute 10 to 15 percent of their income (including any employer match), T. Rowe Price found in a recent study that the average default contribution rate for millennials was 3 percent.

Still, advisers are encouraged that many millennials are setting something aside, despite the financial planning challenges they face. About 83 percent of the millennials polled by Lincoln Financial said they save money from every paycheck, compared with 78 percent of the general population. (The Lincoln Financial Group polled 2,273 U.S. adults ages 18 and older.)

"Pensions and Social Security were nice because they delayed the need to start a retirement plan, but that landscape has changed for our generation," said Mike Salmon, a financial adviser — and a millennial — at Moisand Fitzgerald Tamayo in Orlando, Florida.

Salmon recommends millennials gradually increase the percent of savings, even by a percentage point or two. "The goal is always to save more."