- ORIGINAL NEWS
Why millennials’ retirement outlook may be worse than those of older generations
- SUMMARY
Millennials’ retirement prospects might be shakier than the previous generation’s.
The reasons are long-term policy changes such as a later age for full Social Security benefits, a shift to 401(k)-type plans, longer average lifespans, and a larger student debt burden influencing the ability to save for retirement.
However, reasons for optimism exist, such as the adaptation of 401(k) plans to boost participation and savings.
Younger households have advantages like advanced education and potential longer working years to compensate for their current lagging behind.
To prepare for retirement, consider increasing savings, even if it’s a small amount, and automate the process.
It’s also important to prioritize paying down bad debts and emergency savings while not compromising retirement savings for college education expenses.
- NEWS SENTIMENT CHECK
- Overall sentiment:
negative
Positive
Negative
“They’ll be 28 to 43 years old this year.”
“Millennials, a cohort born from roughly 1981 to 1996, are the nation’s largest adult generation.”
“By comparison, individuals in Gen X were born from 1965 to 1980, and baby boomers from 1946 to 1964.”
“About 38% of early millennials, those born in the 1980s, will have “inadequate” retirement income at age 70, according to projections from a 2022 Urban Institute study.”
“Likewise, net wealth for 31- to 34-year-olds is 53% of their annual income, versus 76% and 59% for similarly aged Gen Xers and boomers, respectively.”
“The primary reason for the wealth gap: student loans, CRR found.”
“More than 42% of millennials ages 25 to 36 have student debt, versus 24% of Gen Xers at that age, according to a 2021 Employee Benefit Research Institute study.”
“Household wealth for the typical millennial household was about three-quarters that of Gen X at the same ages ($23,130 vs. $32,359, respectively), despite millennials having more home equity and larger 401(k) balances, EBRI found.”
“”Student loans are really taking a dent out of [millennials’] net worth,” said Anqi Chen, a co-author of the 2021 CRR report and the center’s assistant director of savings research.”
“”It’s unclear how that will play out in the long run.””
“While older workers with access to workplace retirement plans relied on pension income, workers today, especially those in the private sector, largely have 401(k)-type plans.”
“”Pensions started to go away in the mid-’90s, when Gen Xers were just starting in the workforce and millennials were still in grade school,” Copeland said.”
“Pensions give a guaranteed income stream for life, with contributions, investing and payouts managed by employers; 401(k) plans offload that responsibility onto workers, who may be ill-equipped to manage it.”
“In 2020, 12 million private-sector workers were actively participating in pensions, while 85 million did so in a 401(k)-type plan, according to EBRI.”
“While workers can potentially amass a larger nest egg with a 401(k), the “big issue” is that benefits don’t accrue automatically as with a pension, Copeland said.”
“”The old pension system didn’t work for everyone,” Johnson said.”
“”But it did provide more security than the 401(k) system does today.””
“The last major Social Security overhaul, in 1983, gradually raised the program’s “full retirement age” to 67 years old.”
“This is the age at which people born in 1960 or later can get 100% of their earned benefit.”
“That increase, from age 65, delivers an effective 13% benefit cut for affected workers, according to the Center on Budget and Policy Priorities.”
“Congress may deliver more benefit cuts to shore up Social Security’s shaky financial footing; such reductions would likely affect younger generations.”