Will Millennials Ever Be Able to Retire?
Guest Post by Ainsley Lawrence
Millennials have had some pretty intense experiences over the years. They’ve seen life with and without the internet, have lived through economic crises on a global scale, and have watched the traditional ways to create a career and invest their hard-won cash erode beneath their feet.
With such a track record of challenges, how are smart millennials choosing to invest their time and money? Let’s break it down.
The College Game
Heading off to college has become a right of passage in American culture. The past may have seen only select people enter universities, usually in search of very specific knowledge and training. But these days everyone’s trying to get in … and then get out as fast as they can.
The truth is, college is wildly expensive. The cost of tuition and fees more than tripled over the four decades. Yet, the hefty financial investment that most colleges demand tends to deliver watered-down degrees with much less career impact than they’ve had in the past.
That’s not to say that the colleges are universally pumping out lackluster education. The problem is an oversaturation of “qualified” (e.g. college-educated) candidates within the job market.
This has increasingly opened up the conversation regarding whether traditional college really is right for everyone. Clearly, there will always be a need for higher education. But, the alternative doesn’t need to simply be flipping burgers at the nearest fast food joint with a perpetually defeated look on your face.
Instead, many astute millennials have used clever alternatives to sidestep the exorbitant costs of most contemporary colleges. This “sidestepping” often comes via things like vocational school or career and technical education (CTE) which opens up the door for other successful, often lucrative career paths.
Experiences Over Stuff
Another way that millennials have shaped the financial conversation is with their spending habits. Millennials, in general, tend to prefer experiences over material things. While this can be a great life mantra, though, one important thing that successful millennials also remember is that everything from eating out to backpacking Europe costs money.
Those who want to be smart with their finances manage to resist the urge to unrestrainedly dump cash into endless adventures in the name of “experience over stuff.”
Buying or Renting?
One major event that has had a huge impact on whether millennials are able to properly invest or not is the Great Recession. The effects of the economic disaster split the generation down the middle, creating two camps: those who were older and personally saw financial devastation from the event and those who were young enough to learn from it and head off its effects in their own lives.
Unfortunately, the former group was hit hard enough to create a strong trend of delaying both marriage and children. This trend led to a further side effect of millennials renting more often, to the point that homeownership was at a record low in 2017.
While this trend has slowly shifted as millennials have recovered from the Great Recession, many are finding the best option for being able to afford a home is to head to markets like Texas or North Carolina where they can actually afford the housing available. This has often proved to be a great way to put down roots and begin investing in equity for the long term.
Saving or Spending?
With Social Security trust on track to dry up by 2034, another pressing question regarding millennial finances and spending habits is how they’re preparing for the future. For example, in 2018, a report was distributed that claimed one in six millennials already had a whopping $100,000 in savings.
But upon further investigation, the figure probably stands closer to 3% having $75,000 or more. The point? Not a lot of millennials are saving money the way past generations have.
This shouldn’t be surprising, though. With loads of student debt, affordable housing remaining elusive, and experiences continuing to be a priority, it’s hard to find the money to save towards the future.
Yet another difficulty with the question of what a “wise” savings plan for a millennial is remains the increasingly tumultuous financial landscape the future offers. While traditional wisdom would suggest that saving for the future is enough, it just isn’t that simple anymore. For example, things like inflation and a lack of social security have caused the quantity of money that should be saved to skyrocket.
That isn’t all though. In addition to higher costs, real wages haven’t budged in decades. In other words, life is more expensive and savings are more demanding, begging the question, what is a wise approach to a savings and retirement plan for a millennial?
One solution that some financially savvy millennials are opting for is to put in 70-hour-plus work weeks and then squirrel away money at top speed. While traditional retirement elements like Social Security may be waning, millennials can still take advantage of things like 401Ks or IRAs in order to save some money towards the future. They can even invest in self-directed IRAs in order to take advantage of commodities such as foreign exchange.
The primary difference, though, is the fact that the savings aren’t made simply in the name of enabling a far-off future life of leisure sans work. It’s done specifically with the aim of being able to reap the benefits of their savings much sooner.
In addition, things like the growing gig economy and the increasing ability to work remotely are allowing millennials to work on their own terms, take breaks, and pace their lives on their own terms.
What’s the point? Even if they aren’t necessarily preparing for retirement in traditional ways, savvy millennials are taking thoughtful, purpose-driven actions to redefine retirement itself in order to adapt it to the modern realities they face.
Whether it’s through more cautious academic decisions post-high school, reigning in those “experiential” spending habits, finding ways to invest in the housing market, or reinventing retirement, shrewd millennials are finding opportunities to invest their money in ways that count.