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Saving for retirement is hard. Then it’s easy. Then it’s not so bad. Then it’s hard again. The tough part is having to actually see the money disappear from my hands every month.
Not long ago, my retirement savings were automated. I hadn’t gotten a Roth IRA yet and all I had was a 401k with my employer. I didn’t think anything of it. Countless articles and people older in age would tell me with terror in their eyes to sign up and contribute to my 401k.
Well-intended advice that falls short.
I was contributing to my 401k! #responsible Every two weeks when I would get paid, money would automatically get taken out and put into my 401k which had an employer match. Easy, breezy.
Not anymore. Since I changed jobs, my new position doesn’t offer a 401k plan. Saving for retirement has become a very conscious thing. In my current situation, I can’t do automatic transfers to my Roth IRA, it has to be done manually.
Physically seeing the money go out of my bank account and into something I won’t access for the next 45 years? It’s freaking hard.
Then I think back to a conversation I had with my dad about his retirement. He, along with many people from his baby boomer generation, didn’t properly save for retirement. My dad is 57 years old and only has a small amount in his 401k.
Luckily he has a healthy pension to look forward to as well as a decent size monthly social security check. Retirement will happen for him when he hits 67. One of the lucky ones.
While many baby boomers are having trouble dealing with retirement, a new focus is on millennials. Is retirement harder for millennials? How the heck are we going to to do it?
Student loans
Many people are graduating university with over $30,000 in student debt. The class of 2016 graduated with an average of $37,000 🙁
This increasing debt is causing shifts in life. With a high loan payment every month, little financial literacy, and a small salary, stashing money away for retirement isn’t a big priority for people. Pushing off investing until the late twenties and early thirties, they’re losing out on the power of compound interest.
High cost of living
Everything seems to be making leaps past the inflation rate: higher education, healthcare costs, homeownership and more.
More materialism
Everyone wants the biggest house, nicest wedding, brand new car, and cool new iPhone 7. There’s a reason the minimalism movement has gained popularity in the past few years. Materialism has been ahead of it and some people don’t want it anymore.
People are moving into big houses they can’t afford, buying new cell phones they don’t need, and generally not being conscious of their spending. Constant advertisements and things like Amazon Prime two-day shipping, one-click ordering and Amazon’s Dash button make getting things super easy. The barrier to entry with spending has been lowered.
Longer life expectancy
Longer life expectancies make the traditional retirement age of 65 more unlikely. Social security payouts are going to be a lot smaller for millennials than they are currently for baby boomers.
Are you ready to live well into your 90’s? Retirement planning is going to involve 25-35 year forecasts with our money.
With pensions being a thing of the past (even the U.S. military is cutting them), higher costs of living, and more debt, is retirement harder for millennials? I don’t think so. In a way, retirement is easier for millennials.
Millennials have resources at their fingertips that didn’t exist for previous generations: hundreds of personal finance websites and blogs offering money management insight, mobile apps for brokerage accounts, and even robo-advisors like Betterment and Wealthfront taking care of investing for you.
What do you think about millennials and retirement? Do you think retirement is harder for millennials?
Colin // RebelwithaPlan
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8 Comments on Is Retirement Harder for Millennials?
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Stefan - The Millennial Budget
August 4, 2016 at 1:16 pm (8 years ago)I think it is far harder for millennials than other generations to save for retirement. We have higher necessary expenses (smartphone, internet, etc.) that we quite frankly rely on and are addicted to yet we need it for business. With stagnated wages and rising cost everywhere it is going to be tough to save any kind of money until late 20s early 30s. Of course if we were responsible with our spending anything is possible on a decent salary but reality is most people graduate with debt then buy a new car, upgrade their phone etc. so financial literacy is key!
Colin // RebelwithaPlan
August 5, 2016 at 5:11 am (8 years ago)In regards to rising costs (especially housing, healthcare, education) and stagnant wages since 2000, retirement planning can definitely be harder on millennials.
Unlike previous generations, millennials REALLY have to be proactive and conscious about their retirement planning (something that isn’t that fun all the time!)
Latoya S
August 4, 2016 at 8:52 pm (8 years ago)That sucks that you cant have it routed directly to your self funded IRA. Does your employer allow contributions to a savings account? I dont know what I would do in that situation but I would have to find another way to automate it because I’m like you, if I have to manually do that myself it wouldn’t get done. It would be far to easy to send that money to Navient and say, here goes some extra money to get rid of these loans!
Colin // RebelwithaPlan
August 5, 2016 at 5:12 am (8 years ago)Oh my, haha. Yeah I totally feel you on just being tempted to throw it at student loans! Luckily I have a board I keep in sight to remind me to keep funneling money into the IRA!
DC @ Young Adult Money
August 4, 2016 at 10:38 pm (8 years ago)Yeah I’m pretty happy about my 401k NOT hitting my bank account before moving into my retirement account – that would be rough to always see it!
I think if you remove the impact of student loans retirement is NOT harder for millennials. I think millennials are extremely lucky to have the technology we have today and it totally flips everything on the head. It’s easier today than ever before to access information to learn just about anything, and with that access you can increase your income, make your money work more effectively, and in general be in a much better spot by the time you hit retirement.
Colin // RebelwithaPlan
August 5, 2016 at 5:13 am (8 years ago)All about being proactive and resourceful, something more millennials have to do!
Kalie @ pretendtobepoor.com
August 6, 2016 at 2:34 am (8 years ago)Student loan debt is making retirement hard for millennials, to be sure. Aside from that, we do have some advantages like you mentioned with lots of resources, apps, and technology. Also, while inflation is high in some areas, other expenses like food and clothing have gone way down in proportion to income since a couple generations ago. I try to remember to be grateful for that!
Colin // RebelwithaPlan
August 6, 2016 at 4:34 am (8 years ago)Oh yeah! There are lots of resources out their to cut down on food costs and create systems for it. Trying to get better at it myself!