Launching into adulthood is never an easy task, but today's
young people do have it pretty rough. Saving for retirement is a luxury that
many in the millennial generation, also called Gen Y, can't yet afford. It's
not just a problem that impacts some individuals in one generation. The burden
of saving for retirement affects individuals nationwide.
A recent survey by Bankrate.com found that the
biggest retirement fear among 18- to 29-year-olds is running out of money. It's
not all bad news, though. Millennials who are able to save for retirement are
generally killing it. Plus, new developments in 401(k) plans are making it
easier than ever to save and invest adequately, if not awesomely.
Retirement accounts:
Who's got 'em?
Though balances in retirement accounts have risen, the
number of retirement accounts has actually fallen since 2007. The people who
managed to hang on to their retirement accounts and stay invested saw their
savings go up. Data from the Federal Reserve show that millennials took more of
a hit on their retirement accounts and they've recovered much less than the
portfolios of the entire population as a whole.
Net worth
For most of the country, net worth plummeted between 2007
and 2013. The silver lining for young people was that, in general, their net
worth didn't have much room to fall. But there's actually more to the story of
millennial net worth. Their struggles to build assets are hampered by
widespread use of student loans. EPI's Morrissey broke down the Survey of
Consumer Finances data into non-overlapping age brackets. This table shows that
the net worth of today's 29- to 34-year-olds, that of older millennials, is
significantly lower than the 2007 net worth of that year's 29- to 34-year-olds.
Student debt load
Today's young people are saddled with student debt. Today, nearly
42 percent of families under age 35 carry student debt, a much higher number
than older generations. With so many young people grappling with loan
repayments right now, the distant specter of retirement is a low priority for
many. Though education is vital to getting ahead in the world, unmanageable
student loans may have set many young people back. Eighteen percent of adults
between the ages of 18 and 29 report that they have too much student loan debt
to consider saving for retirement, according to a survey conducted by Bankrate
in January.
Lagging incomes
Young workers earn lower wages than those with longer
tenures, as a general rule. But in the years between 2007 and 2013, the incomes
of workers under 35 fell more than the wages of the general population,
according to the Fed's Survey of Consumer Finances. Wages have been stagnant
for high school and college grads since the early 2000s. Lagging earnings are only part of the story,
though. Finding a good job is never exactly a cakewalk in the best of times for
young people, and graduating from school into a down economy makes it much
harder.
Long-term impact
Graduating into a high unemployment economy translates to a
roughly 1.8 percent earnings loss per year over the span of a decade, according
to the study. A lucrative field of study can serve as a cushion, but graduates
in fields that pay less than average can see income losses of 50 percent larger
than average. The unemployment rate for
18- to 34-year-olds was 7.9 percent in December 2014, compared with 5.6 percent
for the entire economy. Nearly half of workers with college degrees were
working in jobs that didn't require a college education, according to a 2013
study by the Center for College Affordability and Productivity.
Young people do have
some advantages
Despite the obstacles, millennials have a lot going for them
on the retirement savings front. For example, those lucky enough to land a job
that offers a retirement plan may have more advantages than previous
generations. Bankrate's recent survey on
retirement and saving attitudes found that 29 percent of respondents between
the age of 18 and 29 are satisfied with their current level of saving for
retirement, about the same number as most other age groups.
Inadvertent
diversification
Many may have never even looked at a prospectus or thought
about asset allocation, thanks to relatively new default investment options. The
strongest factor working in their favor is time. With about 40 years to save
for retirement, millennials are still in the best place possible to begin
saving, despite the rocky start to their careers. Throw in some luck and
consistent saving for the balance of their working lives and millennials will
be able to enjoy a fully funded retirement.
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here to access the full article on Bankrate Inc.