Are Millennials F*cked?

MM note: This is why personal finance education is so important. Many Millennials (myself included) just weren’t taught about money. We all together need to share good money habits and help reverse these trends. This is the primary reason we launched the Millennial Money Minutes podcast and distill down personal finance topics in 5 min or less.

young invincibles millennial study
Source: Young Invincibles

A startling new report released last week compares us to the Boomers and highlights how far behind we really are from our Boomer parents. The report titled “Measuring Generational Declines Between Baby Boomers & Millennials” was written by an advocacy group called the Young Invincibles and has some really stark statistics I had to share.

I get sent reports on Millennials all the time and most are super out of touch or just really boring. Not this one. This is the most mind-blowing report on Millennials and Money research I’ve seen yet. I didn’t realize it had gotten this bad. One key point, this new report is based on 2013 data, so I hope that the picture has improved at least slightly since then.

Let’s look at some of the findings:

Five Reasons Millennials Might be F*cked

1. Millennial net worths are half as much as Boomers when they were the same age

Look at how long it’s taking our parents to retire. Many of them are in their 60’s and still working because they can’t retire. There are tons of reports out there that highlight how many Boomers will never be able to retire. What does that mean for Millennials? Will Millennials ever be able to retire?

“By some estimates, the 1 million young adults who experienced long-term unemployment during the recession will collectively miss out on $20 billion in earnings over the next decade, equaling $22,000 per person” the report stated.

This fact hits really close to home. Before I launched my first company, I was laid off from my first job during the recession. I had many friends who were in a similar position and many of them haven’t even started saving even though they are now in their late 20s or early 30s.

2. Our average wages are 20% lower and we earn $10,000 less per year than our parents

The report found that the average Millennial earns $40,581 and our Boomer parents earned $50,910 at the same age. So many Millennials are underemployed. There are many studies that use your early career wages as a predictor of future income potential. It’s also estimated that your starting job salary can impact your potential future earnings by over $500,000. This means that many of us are starting behind our parents and many Millennials might never catch up.

Are Millennials Fucked

3. If you are a Millennial with a college degree and student loan debt you earn the same amount as someone in 1989 with only a high school education

WTF. Really? This is just shocking. Like ridiculously shocking. So with all that student loan debt that many of us are still carrying, my wife included, would we have been better off not going to college? Sure that’s an overly dramatic statement and there are many factors influencing this analysis – but even if it’s even remotely true of college graduates it’s still really unfortunate. Unfortunately, it’s clear to see that there are some Millennials with student loan debt who might never catch up. I strongly recommend consolidating your loans, refinance to the lowest rate possible using services like Lendedu and paying them off as quickly as you can.

4. Also, having student loan debt somewhat negates the impact of your education, based on future earnings and on retirement account savings

“The average retirement account grew at double the rate for those without debt than those with student debt, among the college-educated,” the study revealed, highlighting the increasing importance of paying back student loans while also saving for retirement. Many Millennials do one without the other, which is a mistake. My podcast co-host Matt recently achieved a zero net-worth when his student loan balance equaled his retirement account savings (he’s not sacrificing paying one for the other), which is a smart decision. There is still an opportunity to get ahead.

5. Young African Americans have only saved 10% of the comparative savings of young whites and both Latinos and African Americans earn almost half what young whites earn

This personally makes me really sad and we all need to work together to try and fix this. There is no reason in the United States that everyone regardless of ethnic origin should make less money. Both Latinos and African Americans also aren’t saving as much and young whites for retirement.really sad

Finally, one small (maybe) bright spot is that Millennials overall are saving more for retirement than Boomers, but this is believed to be because young many Boomers were confident they would get pensions from their employers, so individual retirement accounts weren’t as popular. Ugh.

We can all spread this message. Even though eventually there will be the greatest wealth transfer in history between the Boomers and the Millennials, it will not be enough, and we all need to start maximizing our value, start investing as much we can, and try hard to turn some of these trends around.

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  • Comment Author image blank
    Wow, it really does look a bit scary out there for millennials huh? At some point, people can figure out how to turn it around by living on less than they make. This means not buying every new phone that comes out and not leasing or keeping a car payment and driving something you can afford to purchase. Something I heard a while back is that this generation has focused on achieving the same status as their parent's status and try to do it in the first 7 years where the previous generation took 20+ years... If we only didn't live in a time when everyone was looking for the microwave solutions...
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    • Comment Author image blank
      Super scary. Mr Money Mustache had a great point on the recent Tim Feriss podcast, where he basically said that culturally "saving" has been sold as a bad thing, instead of literally the key to unlocking your future time/freedom etc. If "saving" is sold as a sacrifice then, of course, no one will want to do it. What if it's sold as literally the key to doing whatever you want? Let's keep changing the narrative! THnaks for your comment.
      Reply
  • Comment Author image blank
    I try not to buy into the boomers versus millennials thing too much (Hi, Mom & Dad). But the differences in economic situations around first jobs/first homes are indisputable. But I think every generation has its own hill to climb (up hill both ways?!), and I wonder how we will look at ourselves in 10-20-30+ years. Regardless, when I see the five-alarm bell being sounded for our generation, though, I try to remind myself that we are incredibly resilient, resourceful, and innovative. As someone who chose a more traditional path/career of teaching, I'm probably less so than many of my peers, who are working in fields or for companies that didn't exist on career day in high school. So there's that. And that is a really big deal in my opinion.
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    • Comment Author image blank
      I agree Penny. We are resilient, but even the small amount of retirement savings and starting to save 5-10 years late has a massive impact on future wealth. This is more of a battle cry than meant to be discouraging. I know a lot of people who just don't prioritize saving - they think they will always be able to work and there will always be jobs. No so! Thanks for your comment.
      Reply
  • Comment Author image blank
    It’s not much of a comfort to those of us who aren’t expecting a large inheritance (a category which I include myself in), but that last factor you mention - that we will be the recipients of the single largest transfer of wealth in human history - is HUGE for our generation. This won’t benefit every one of us directly. Not all of us have rich parents. Hell, a lot of us have parents who we’ll have to take care of. (You know, like most people did with young children and old parents throughout human history.) But, it will indirectly benefit all of us, because Millennials will be buying stuff with money that Boomers were currently saving. I’m not saying that Millennials are inferior savers compared to Boomers – I’ve actually come across a lot of evidence to suggest the opposite. But we will be buying homes, making home repairs, buying groceries, getting married, etc. In some sense, there will be a buying frenzy because we'll be playing “catch-up” with where our Boomer parents were at that stage in life. Basically, we'll be living. And we'll be spending or investing the Boomers’ money as well as our own earned income – earned income which will quickly rise as Boomer jobs open up due to retirement and death. (Sad, but it’s the circle of life.) Which means, tangentially, the spending of some Millennials will be generating income for other Millennials who didn’t inherit fortunes. I don’t mean to paint too rosy of a picture. I just assume that we can count ourselves as part of the rule, not an exception. We are probably going to follow the same trend as prior generations. I highly recommend this VSauce video about that topic: https://www.youtube.com/watch?v=LD0x7ho_IYc
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    • Comment Author image blank
      Thanks Vigilante. The "catch up" concept is interesting. The next 5-10 years are going to be crazy. There will be some massive home purchasing (but maybe not). Someone is going to have to run the world - might as well be us :) It will definitely be fascinating to be a part of and witness. BTW - I just watched that entire video. Fascinating about how people think about generations and differences. "Loss Aversion and the Endowment Effect" are pretty heady neuroscience concepts. This is the best video I've seen all week. Thanks for sharing!
      Reply
  • Comment Author image blank
    Those really are scary stats - I had no idea. Time to start another side hustle to make up for that lost $10k!
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    • Comment Author image blank
      I know Wes! Thanks for stoping by.
      Reply
  • Comment Author image blank
    The thing that screwed a lot of millennials is starting our careers right in the worst recession since the Depression. There are economists out there who've studied the impact of starting salaries on your future yearly earnings, and basically, if you start out with a lower salary (like in a recession), you never catch up. I believe these economists studied folks who graduated right in the big recession in the 80s and saw that 20 years out, they were still behind. My guess is that a lot of us millennials who graduated between 2008 and 2010 will be in a similar boat when they look at our stats 20 years later. But I think millennials have a lot going for them. I know there are some stats saying we're saving a lot more than the boomers did. And I think we are definitely less interested in material stuff. You can see it all with the decrease in car use, less McMansions, clothes getting cheaper, and things like that (although maybe people are just replacing the fancy car and mcmansions with luxury apartment rents),
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    • Comment Author image blank
      Thanks! Yeah, the impact of our salaries today have a huge impact on our future wealth. Tons of studies. I agree we as a generation have a lot going for us, but I also feel like our view as personal finance bloggers is limited - we hear about how so many Millennials are now saving, but then I look at how some of my employees (all Millennials) for example aren't saving anything. The media of course is always going to paint 2 pictures - Millennials aren't saving and Millennials are. We are a generation of 70 million + people so obviously a huge spectrum, but overall a vast majority of my friends and millennials I meet really are behind. Few of them probably have more than a few thousand dollars saved and aren't investing much in their 401ks. Yes, contributing a few thousand dollars is a start and better than nothing, but to really use compound interest and have a show at retirement millennials need to be saving at least 25%+ of their income. That's a radical idea for most (not us FIRE bloggers), but that's definitely not mainstream. I agree we have a lot going for us - we are creative and entrepreneurial to our cores, but we are starting so far behind. This has always scared me and what really pushed me to hustle over the past 5 years. Thanks for your comment!
      Reply
  • Comment Author image blank
    Yikes! Those are some scary stats. I'm glad the study analyzes the same age group, separated by ~25 years. Many of these studies miss the mark by analyzing people in different age groups in the here and now. Similar to the positive you pointed out, I'm confident millennials will figure out the retirement puzzle well before we end up in the same hole as older generations. We'll be fortunate enough to learn from others mistakes. Sadly, not much boomers can do late in the game to catch up, but Millennials have a long runway to reach a comfortable lifestyle.
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    • Comment Author image blank
      I know right? Super scary stats. This is why personal finance is so important. I just hope that more millennials will realize that money isn't complicated and not get discouraged by these trends, and for some, their situations today. Building wealth is easier than most people think with the right habits. Thanks Matt.
      Reply