Millennials Financial Struggles…And Successes

Millennials often get a bad rap. Yet despite their financial hurdles, new research shows they may be on track to surpass their elders when it comes to saving for retirement!

Millennials often get a bad rap from older generations as self-centered, entitled, and financially irresponsible.-

This generation, born from 1981 through 1996, now numbers more than 72 million, making it the largest generation alive in the U.S. right now. According to the latest Census Bureau numbers, that’s slightly higher than the number of Baby Boomers.

They have faced many uphill struggles that hurt their chances of achieving traditionally defined financial success, such as buying a home, having a family, or working for the same employer for several decades.

Despite these hurdles, new research shows that this huge generation is on track to equal or surpass their elders on one key financial metric: saving for retirement.

The mutual fund giant, Vanguard, reports that this cohort started to save at earlier ages than its elders, and many of them have retirement accounts that are on track for a relatively secure retirement.

Starting Behind the 8-Ball

Before we get into the numbers and prospects for this generation, let’s review some of the headwinds they have faced.

Many millennials came of age just as the dot-com bubble and the Great Recession of 2008-2009 wrecked the economy — and their chances of finding a good job. On top of that, college education costs were soaring at unprecedented rates, saddling many with huge piles of student debt. The average millennial, now 28-to-43 years old, carries a student loan debt of about $33,000. That puts a big dent in their net worth. Add another $6,500 in average credit card debt, according to the credit rating agency Experian, and the exorbitant cost of child care.

That helps explain why this generation has trailed behind its elders in marrying, starting families, buying homes, and accumulating wealth.

Generations Birth Year
Greatest Generation 1901-1927
Silent Generation 1928-1945
Baby Boomers 1946-1964
Generation X 1965-1980
Millennials 1981-1996
Generation Z 1997-2012
Generation Alpha 2013-Present

It’s Not All Bad News

This generation is pragmatic, tech-savvy, and deeply influenced by the economic events of their formative years.

A study by the Pew Research Center found that many millennials, having entered the workforce during or in the aftermath of two of the worst economic downturns in recent history, have developed a cautious approach to spending with a heightened emphasis on financial security.

The Vanguard report shows that older millennials are on par with or ahead of Gen Z and Baby Boomers in saving enough to replace income in retirement.

Separately, a report by Fidelity Investments shows the average millennial started saving for retirement at age 24, which is considerably earlier than previous generations. Compounding and other factors can lead to substantially higher retirement nest eggs.

All the research points to the fact that many 401(k) and other retirement plans are now the default option for many employers, meaning you have to opt-out if you don’t want to contribute money from your paycheck to a retirement account. These automatic enrollment plans make participation much more likely and help establish a pattern of saving from a worker’s very first day on the job.

It’s one of the rare instances where our inherent laziness might work in our favor!

A Look At The Numbers

Vanguard found that 60 percent of workers now automatically enroll, up dramatically from just 10 percent in 2006.

The report says that workers who earn $61,000 a year are on track, or very close, to being able to replace enough of their income to cover their spending needs in retirement. By contrast, Baby Boomers and Gen-Xers earning the same amount cannot make the same claim.

It’s also worth noting that millennials are the most educated generation ever. A much larger percentage have college degrees compared to earlier generations, and a college education strongly correlates with higher incomes.

Because of the economic headwinds they faced, millennials’ earnings were initially behind those of older generations. However, a study by Boston College’s Center for Retirement Research found that their earnings started to catch up in their 30s, but they still trail behind in terms of wealth accumulation.


Of course, any long-term projections are complicated. Millennials are likely to face much longer periods of retirement as life expectancy rises, and there remains uncertainty about whether the Social Security safety net will still be in place decades from now.

Also, the retirement prospects for lower-income workers remain challenging across all generations. A GoBankingRate survey found that nearly half of all Americans have less than $500 in savings.

One commonly used metric to see if you are on track for a comfortable retirement is to save the equivalent of your salary by age 30, 2x your salary by 35, 3x by age 40, and follow that pattern every five years. That way, you should have 10-12 times your salary saved by age 67.

Despite lots of data, we may not know how this plays out for millennials for another 30 or 40 years.

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