Monthly Archives: July 2014

Millennials face dire retirement odds

Those born between the 80s and the new millenium may have enjoyed the birth of the internet, and can thank wikipedia for helping with their homework, but they are facing a somewhat sinister future in terms of retirement.

If we have been facing a bit of economic turmoil over the past years, perhaps those who suffer these costs the more are the Millennials. Indeed, members of the so-called generation Y (born between the early 80’s and the early 2000’s) not only had to grow up through the fashion disaster that were the 90’s, but are now facing dire odds when it comes to their own retirement. Let us look at the various reasons behind the issues faced by the Millennials.

Not everything can be blamed on the economic crisis everyone suffered through. One of the key issue with Generation Y ers is that they do not start saving early enough, and simply putting a little away at the end of the month can save you a tremendous amount of trouble later. Andy Kiersz, of the Business Insider, sums it up this way: if you want $1 milion at age 65 and you assume a 6% annual return, you only need to save $360 a month if you start saving when you’re 20, as opposed to $700 is you start at age 30.

Not only aren’t the Millennials saving enough, but most of them are also severely in debt. The key issue for this are student-loan. With the all time high costs of US higher education, and the rising costs of higher education in other countries, many are burdened with student loans that prevent them from acquiring assets in their professional lives. Paying back their student loans over the first decade of their professional lives prevents them from purchasing a house or making appropriate investment, and also costs them years of saving for retirement.

Generation Y is also thought to have poor financial literacy – according to various surveys and studies. If it is not necessarily true that they are more ill-equiped than their parents to make informed financial-related decisions, it is certain that they have to make more of those decisions on a daily basis, especially in the work place.

Additionally, pensions and social security are no longer regarded as valid ways to plan one’s retirement. Their parents benefited from pensions, so it is often perceived today as the basis for retirement, but most employee today is unlikely to benefit from a pension, except if they work for the government.

The Millenials also have to deal with income inequality once they leave college and begin their professional lives. If there are high paying jobs out there for the Millenials, the demand is often found in particular sectors (today, think programming or graphic design). Those with the skills in high demand are likely to find a well-paid, stable job, but those who follow jobs that are still vital to the economy but are not as ‘hot’ today will struggle to save for their retirement.

If these odds seem somewhat pessimistic for the members of Generation Y, one must remember that the economy is recovering, and that they may very well benefit from this recovery too.


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