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.
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.
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.
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.