Like a newborn babe, millennials as a generation are analyzed, observed and for many marketers, doted upon for their size and spending power.
But when all is said and done—will they have enough to retire?
It’s a difficult question the Center for Retirement Research at Boston College attempts to answer in its latest issue brief, noting that while millennials have high education levels, they’re behind their older counterparts on many key indicators of retirement preparedness, a cause for concern.
“Having entered the labor market in tough times, millennials have lower wages and fewer fringe benefits than Gen-Xers and late baby boomers did as young adults,” CRR director Alicia Munnell and Wenliang Hou write. “This difficult start, combined with high levels of student debt, has delayed them from getting married and buying a home.”
They, therefore, note that “not surprisingly, then, millennials have less wealth than previous cohorts, even though they will need more due to longer lifespans and reduced Social Security.”
Thankfully, they add, retirement is still a long way off for the generation in general, so they have time to “get back on track.”
Increasing longevity, of course, is a large part of the issue.
“Millennials’ lack of wealth in their 30s relative to earlier cohorts should be a source of great concern given that they will live longer than previous cohorts and that they will have to wait until age 67 to collect their ‘full’ Social Security benefit, which produces a substantial actuarial reduction for monthly benefits claimed early.”
“Moreover, Social Security faces a long-term financing shortfall, and the program’s Trustees project that—without an infusion of revenue—it will be able to pay only about 75 percent of benefits after the program’s Trust Fund is exhausted in 2034, so Millennials could face further benefit reductions,” the authors conclude.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
