It's estimated that one out of every three Americans has no retirement savings, and younger workers are a big reason that statistic is so dire at present. According to a newly released report from Merrill Lynch, 42% of millennials aged 25 to 39 have not begun saving for retirement, and while part of that is a product of student debt and high living expenses, it's also due in part to misplaced priorities.

In a recent LendingTree study, millennials were asked to list the top things they were saving for in order of importance. While emergency funds thankfully topped the list, younger Americans then ranked their savings priorities in the following order:

1. Down payment on a home

2. Vacation

3. New computer

4. Retirement

Yikes. While saving for a home should by no means trump retirement entirely, it's at least a reasonably responsible goal. But if you're putting travel and electronics ahead of retirement, you clearly have your priorities skewed. And if you don't change your ways sooner rather than later, you'll be putting your financial future at risk.

Young couple exploring San Francisco


Save early or save more -- the choice is yours

Many people are convinced that their living costs will drop significantly in retirement, but this often doesn't happen. In fact, data from the Employee Benefit Research Institute says the opposite -- almost 50% of households wind up spending more money, not less, during their first two years of retirement, and this trend lasts for six years among 33% of households.

While it's true that certain costs, like commuting, are likely to go down in retirement, healthcare is one major expense that almost universally goes up. Housing can also be pricey for seniors, especially since fewer are managing to pay off their mortgages in time for retirement. And let's not forget leisure, which many seniors spend good money on in an attempt to occupy their abundant free time.

Even in a best-case (frugal) scenario, you'll probably need at least 70% of your former income to cover your living costs in retirement. And since Social Security will only cover about half that amount, it's on you to come up with the rest.

Now when it comes to retirement savings, you do have a choice. You can start early on and grow smaller contributions into more, or you can start later but allocate more of your income to retirement savings at a point in your life when you'll probably have other expenses (like children) to pay for.

The following table shows how much you stand to accumulate if you start saving $300 a month at various ages:

If You Start Saving $300 a Month at Age:

Here's What You'll Have by Age 65 (Assumes an Average Annual 8% Return)










Now $300 is a pretty practical monthly savings target, even if you're in your mid-20s. And if you save that amount each month for 40 years, you'll get pretty close to hitting the $1 million mark by the time retirement rolls around. On the other hand, if you wait even five years to start saving that amount, you'll have $312,000 less to work with. Or, to put it another way, failing to set aside an additional $18,000 in savings early on in your career will cost you $312,000 in retirement income.

Now you can still get to that $932,000 total if you start saving later on -- but you'll need to be willing to part with much more than $300 a month. If you start saving at age 30, for example, you'll need to set aside $450 each month to roughly hit that same target. Wait till 35, and you're looking at close to $700 a month.

Furthermore, if you start saving $300 a month at age 25, you'll contribute a total of $144,000 to grow your nest egg into $932,000. But if you start saving $450 a month at age 30 to reach that same total, you'll need to contribute $189,000 to get there. In other words, saving for retirement at an early age will actually cost you less over the course of your lifetime.

While there's something to be said about getting away and seeing new places, putting vacations ahead of retirement means seriously compromising your future. And though you can't negate the importance of having a functional computer, you don't need to buy a top-of-the-line model, and you certainly don't need to replace a machine that isn't actually broken. Remember, you have the rest of your life ahead of you to explore the globe and treat yourself to high-end electronics, but for now, you should be putting retirement savings much higher on your list.