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What Will Retirement Be Like for the Next Generation?

The millennial generation and Generation Z are facing down a multitude of crises ranging from another impending financial disaster to the ever-present threat of climate change. What’s more, millennials have entered the workforce en masse over the last decade and have found that it is far less hospitable to their generation than it was to the baby boomers or Gen X. While retirement has been the ultimate goal for generations past, millennials and Generation Z are finding that the very idea of retirement might be out of reach for many of them.

A Shifting Definition Of Retirement

Early retirement seems like it would be a pipe-dream for millennials and Generation Z, especially considering the level of financial security needed for early retirement. Passive income must outpace expenses and the number of diverse investments required to achieve that financial independence doesn't seem likely for a generation that is increasingly living paycheck to paycheck. However, there are millennials who are prioritizing an early retirement simply due to the fact that they are terrified of what the future might hold for their financial security.

Much of that insecurity and worry comes from the current state of Social Security in the United States. While Social Security was initially intended to combat old-age poverty, the system as it exists today tends to payout the highest benefits to the highest-paid workers who in turn have the greatest ability to plan for their eventual retirement. Upper and middle-class retirees are currently receiving the greatest benefits from Social Security, classes that millennials are struggling to become a part of.

One of the driving factors keeping millennials out of the middle class is the fact that their generation entered one of the most volatile job markets in history after the Great Recession crippled the U.S. economy. While millennials are the most educated generation in U.S. history, their education had an adverse effect on their ability to find employment. Fields became inundated with candidates all at once with many of the well-paying positions held by baby boomers and Gen Xers who didn't have plans to retire any time soon.

This then prevented millennials from paying off student loans quickly, which made the debt accrue far more interest than it would have otherwise. Combined with rising rent prices and a reluctance to invest, this has led to a projection that recent college graduates will not be able to retire until they are 75 years old.

Many Won't Be Prepared

Millennials are woefully ill-prepared for retirement with only 33% of all millennials having started savings of any sort for their eventual retirement. Many of the millennials who are making any sort of preparation for their retirement are doing it through their company's 401(k) program, but now companies are beginning to embrace the gig economy, moving many of their operations to freelance and contracting. This leaves many millennials not only without the option to invest in a 401(k), but also takes away the opportunity for other benefits like healthcare that put a further financial strain on them.

Another way in which millennials aren't prepared for retirement is in their lack of large investments like homeownership. After the housing crash of 2008, millennials weren't exactly set up for success when it came to purchasing their first home. Anxiety over their financial stability coupled with the low income-to-debt ratios created by the immense amount of student loan debt the generation has taken on has made it more difficult to obtain a mortgage. While many millennials are content renting, those who want to branch out and become homeowners are facing a difficult road.

A mortgage is essential to purchasing a home, and mortgages can be hard to obtain for millennials due to the aforementioned low income-to-debt ratios. Factoring in other requirements such as long-term stable employment, good credit scores, and the ability to produce the sizeable sum required to cover the down payment and closing costs on a home, homeownership is an increasingly far-off fantasy for many millennials.

Is There Any Solution?

While many millennials are already living with their parents in order to save money, the nature of the relationship between millennials and baby boomers is changing when it comes to who lives with who. Millennials are finding themselves becoming caregivers for their parents more often, placing even more burden on them both in terms of time and finances. Older millennials who have become homeowners are seeing firsthand that retirement can look much different than expected, even for those who are more prepared for it.

Downsizing has long been a part of retirement, as those of retirement age generally need less space and can live comfortably in a tiny home or manufactured home in an age-restricted community. However, younger generations may not have the ability to downsize into smaller homes due to a shortage of single-family homes available on the market, many of which have been snatched up by baby boomers looking to either rent them out as a source of income or downsize into themselves. Action needs to be taken at the highest levels of government to combat the retirement crisis.

Unfortunately, as it stands, it seems as though little progress is being made on that front. While the House has fast-tracked bills like The Secure Act which aims to give part-time workers access to retirement plans and expand the inclusion of annuities in 401(k) plans, the Senate has let bills intended to improve the future of many Americans to sit without a vote. While Democrats are pushing to expand elderly benefits, Republicans are rebuking them at every turn and even seek to cut benefits like Social Security and Medicare.

At the end of the day, the retirement crisis for young Americans is a very real issue. The goalposts of retirement are being moved back further and further, and due to circumstances often out of their control, younger generations have to look on in horror as the prospects of retirement seem to slip away. Though there are plenty of good lawmakers fighting for a better future, the current political climate has all but ensured that progress won't be made until at least 2020.

Posted by jhamilton at November 5, 2019 12:01 AM
Comment #450478

jhamilton is painting a rosy picture of the generation in question and blames society and the economy for it’s woes. Nowhere in the article did he mention the studies taken while accumulating student loan debt. Perhaps they can’t find a job because gender studies isn’t a career.

jhamilton also isn’t considering how the Federal Reserve Act affected the value of money during the century it’s been in effect. The value of a dollar is pennies compared to what it was in 1913 when the Federal Reserve Act was passed.

The stock market seems to be the only way people can save for their retirement. Since when? Could the SS program have any part in that? Interest on savings is almost non-existent. Home prices jhamilton mentioned are also non-existent. Why? Why is our entire nation’s retirement program vested in a system that can be affected by the weather, or a ship sinking, or the enactment of some ill thought of law or lack thereof?

Our nation will have to face the facts and identify the problem. Every generation, except the last, are to blame in one respect or another. I’ll lay the most blame on the generation who bought the pig in a poke called the New Deal. The methods used to enact FDR’s New Deal were born in desperation and funded by promises and lies. That illusion was exacerbated by the feast mentality of the 50’s and 60’s after WWII with no regard for the famine that would eventually follow. SS may have been possible to maintain, but the added promises during an economy unchallenged are becoming unbearable.

Generation X will have to realize that raising children without morals, discipline, and responsibility leads to the crime, poverty, literacy, and employment problems we experience today. They have to realize free love comes with free disease and free pregnancy. It doesn’t come with free healthcare.

The Millennial generation is old enough to think for themselves. They should consider government to be a necessary evil, not a devoted caregiver. They should cast off the SS and healthcare burdens government has saddled them with. They should use the information and technology available to them to find alternatives that work for them, not their ethnic or gender group. They should not except a lesser cost by being forced to associate with a group. They should consider themselves an individual, a member of the largest group in the history of our nation, the group of individuals.

Posted by: Weary Willie at November 5, 2019 2:25 PM
Comment #450704

It is highly probable that it will become increasingly difficult for most people to save, and amass wealth for this one reason:

Posted by: d.a.n at November 13, 2019 2:19 PM
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