Gen Y'ers, also known as Millennials, have been plagued by poor economic conditions that have made it difficult to get and keep a job, especially one that matches their skills and expertise. Many Millennials also face crushing student-loan debt that makes it difficult not only to save for retirement, but also to buy a house or think about starting a family. A study by personal-finance website NerdWallet found that recent college grads won’t have enough assets to retire until they’re 73, whereas the current average retirement age is 61. With an estimated life expectancy of 84, Millennials may not have many years to enjoy retirement – if they achieve it at all. Here are five warning signs of trouble ahead.

1. Financial Literacy Gap

Only 18% of young Millennials (ages 18 to 26) correctly answered four or five questions on a five-question financial literacy quiz in 2012 – and only 30% of older Millennials (ages 27 to 34) did, according to the "Financial Capability of Young Adults" brief produced by the Investor Education Foundation, a program of FINRA, the Washington, D.C-based Financial Industry Regulatory Authority. This multiple-choice quiz asked how money in a savings account earns interest, how inflation affects investment returns, what happens to bond prices when interest rates rise, how a 15-year mortgage’s payments differ from those of a 30-year mortgage, and whether it is safer to invest in a single company’s stock or a stock mutual fund. In addition, 69% of Millennials have no formal financial education, and only 36% describe themselves as financially knowledgeable, according to a February 2014 poll by TD Bank.

Financial literacy is a big problem for Millennials, but it isn’t unique to this generation. “In many ways this is the biggest problem facing the country in regards to retirement,” says Jamie Hopkins, assistant professor of taxation at The American College of Financial Services in Bryn Mawr, Pa., and associate director of the New York Life Center for Retirement Income. “It is incredibly difficult for the Millennials – or any generation – to properly plan for retirement if they do not understand Social Security, withdrawal strategies, annuity products or even more basic financial concepts, such as the importance of budgeting and compound interest.”

But Millennials face a unique problem compared to previous generations when it comes to their financial illiteracy: “They are required to make more financial decisions that they may be ill-prepared to handle,” says Certified Financial Planner Steven Elwell, a millennial and vice president of Schroeder, Braxton & Vogt Financial Advisors in Amherst, N.Y. In the employee pension systems of the past, “the employer always managed the investments in a pension and the retiree didn't need to make any decisions other than when to start receiving their benefits,” he says. “In today's 401(k) world, the employee needs to make practically all the decisions, and that's much more difficult for the employee.”

2. Delayed Savings

Only 61% of Millennials label themselves “savers,” according to a 2013 Wells Fargo survey. This statistic is problematic because saving early is one of the best ways to ensure a comfortable retirement. According to Business Insider’s Andy Kiersz, if you want to have $1 million at age 65 and you assume a 6% annual return, you only need to save $361 a month if you start at age 20. At age 25, you need roughly $500 a month, and at 30, it rises to $699. Wait until you’re 45 and you’ll need $2,154 a month, which is hardly manageable if you have a mortgage and kids.

“The first step for Millennials to take is to start saving as soon as they're out of college and working,” Elwell says. “What they invest in, and which type of retirement account they use, is less important. The key is that they just start early. The earlier they start saving, the easier it will be,” he says. “For most workers, it will make sense to contribute to their employer's 401(k), make sure they get the full match if there is one and aim to save 10 – 15% of their income.”

3. Drowning in Debt

Almost half of Millennials say they have too much debt, according to the FINRA study. For millennials, student-loan debt is a particularly big problem.

NerdWallet’s recent study of Millennials’ projected ability to retire found that the median debt for a student at graduation was $23,300, and that this debt came with a standard loan repayment plan of 10 years at a cost of $2,858 per year.The study projected this debt load would cost Millennials $115,096 (in today’s dollars) by retirement because, instead of saving for retirement in their 20s, these grads will be paying off student loans and will miss out on the most important decade of retirement savings – the one that offers the longest timeframe to earn compounded returns.

“Due to student-loan debt, many young adults are delaying purchasing homes and saving very little for retirement because they need to meet this required monthly expense,” Hopkins says. “It is likely that the current generation burdened with large amounts of student debt will have to work longer than previous generations because their retirement-savings period is being delayed. Essentially, paying a debt now, one that other generations did not have to pay, will result in less savings for retirement or purchasing a home.”

4. Income Inequality

Of 18-to-34 year olds, 65% had annual incomes below $50,000 in 2012, according to the FINRA's Investor Education Foundation. The median starting salary for college grads who do have jobs, according to NerdWallet: $45,327.

“Millennials have a unique challenge of trying to secure long-term employment in a jobless recovery, which can be argued is not really a recovery,” says Ken Rupert, a Christian life coach with the Vita-Copia Group in Hampstead, Md. “The greatest tool anyone has for wealth building is income. With less opportunity to secure long-term employment, Millennials have less opportunity and hope of retiring,” he says.

But the picture isn’t so bleak for one subset of Millennials. “Those with in-demand skills, such as programing, are finding jobs quickly – high-paying jobs, even,” says Michal Ann Strahilevitz, professor of marketing at Golden Gate University in San Francisco. “Many of those members of [Generation] Y will be retiring early, or at least they will have the option to.”

“Those that are following their passion regardless of whether that passion is marketable may be finding it harder to find steady work with a reliable income; thus that segment of Gen Y will find it harder to retire,” she says.

5. Insufficient Social Security and Pensions

More than a third of Millennials expect to receive 0% of their retirement income from Social Security, and another 21% say they have no idea what to expect, according to the Wells Fargo survey.

“Millennials are definitely looking at a different retirement,” says Derek Mazzarella, a millennial and a financial advisor with The Bulfinch Group in Needham, Mass. Most Millennials’ parents entered the workforce when employers still offered pensions, he says. “Those pensions will not fund a full retirement, but for a large portion of the population from that generation, [pensions] will provide at least supplemental income. Millennials will not have this option unless they work for the government.”

Some see Social Security as a rapidly collapsing pyramid scheme with more people retiring than the system can support. Millennials don’t – and shouldn’t – expect it to be a substantial source of income in retirement, despite the hefty taxes they’re paying into the system today: 6.2% of gross income, plus another 6.2% employer match.

“The mostly likely outcome is that Millennials will still have Social Security available to them, but the benefits will be minimal and the withdrawal age will increase,” Mazzarella says.

The Bottom Line

A number of alarming statistics show that Generation Y isn’t taking the necessary steps toward retirement. Most members of this generation didn’t have the opportunity to learn personal finance in school, so unless they learned it from their parents, a mentor or through a concerted individual effort, many don’t know how compound interest works, let alone how to save and invest for retirement. The good news is that despite how bleak the past few years have been, economic conditions continue to improve, and Millennials are still young enough to make a comeback, achieve financial security and one day retire.

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