How Bad is Retirement Looking for Millennials?

This post may contain affiliate links. If you purchase products or services linked from this page, Summit of Coin may receive a small commission at no extra cost to you.

Two weeks ago as I was working on some articles for the website, I stumbled on an interesting article about social security. The article was titled, "Millennials and Retirement: How Bad is It?" by Alicia H. Munnell on Politico's website. 

The article dug into the numbers of savings for retirement. The data that they shared was from a study conducted by the U.S Board of Governors of the Federal Reserve System, titled, "Survey of Consumer Finances, 1983-2016." In the article, they shared the following graph.

According to this study, the millennials as a whole are falling behind the previous generations. The author of the article attributed their falling behind to the following reasons:

  • Men and women are struggling to find decent jobs that offer good wages and health care. 
  • Lack of access to employer sponsored retirement plans.
  • Less likely to have bought a home.
  • More likely to be burdened by student loans.
  • Wealth-to-income ratios is expected to remain lower than previous generations throughout the lifetime of millennials.
  • Expected to live longer than previous generations.
  • They will have to wait longer to receive their full social security benefits.

The author went on to suggest that millennials can help subside this negative wealth-to-income ratio by working longer. By working longer, a millennial will benefit in three ways.

  1. Social Security Benefits will be 76% higher by working until age 70.
  2. 401 K assets will nearly double from age 62 to age 70.
  3. Increases the ratio or working years to retirement years (basically need less money in retirement, because they worked longer). The author added, "Retiring at 70 leaves the ratio of retirement to working years the same as when Social Security was originally introduced."

Surprisingly, the author took a lot of heat for the article. In my opinion, she was stating the facts of the data and making a suggestion of 'working longer' as a way to live comfortably in retirement. She did not ever say that you have to work longer, however, she suggested it as a strategy. Actually, she suggested three items to millennials in her quote below, before digging into 'working longer.'

"However, the good news for millennials is that retirement is still a long way off. A lot will depend on their future savings patterns, financial market returns and, particularly, how long they work." - Alicia H. Munnell

Basically, she listed two more factors that can affect retirement age. I'm not too worried about financial market returns, because the market will always continue to grow over time. Therefore, the biggest factor to shorten your age of retirement is how much you save.

Related: Why does the Stock Market go up over time?

Despite the data that Alicia used and her statement about other possible factors that will affect retirement age, people were not happy with this article. They did not like the idea that they had to work longer to just receive the maximum retirement benefits. Below, I have listed a few of those comments and my opinions of the comment. Enjoy!

Quote #1

I did not see anything about baby boomers taking all of the social security money in the article. You can blame the way that the program was set up, but not all the baby boomers. 

Quote #2

I believe 'e pe ted' is supposed to read as 'expected.' I'm not really sure where she was blaming millennials in the article. She was stating the facts and a possible solution to the facts, not blaming anybody at all. 

Quote #3

You don't have to work a job with a lower income. If your job doesn't pay you well enough, go find a better paying job. Go get another degree or start your own business. You can make changes to your income, but you can't make the government pay you a living wage. 

When it comes to college, you don't have to take out student loans, and you don't have to go to the most expensive college.

Further Reading: The Importance of College Choice and Student Loans: A Necessary Evil

Quote #4

Oh my, he said it! You can control your life and be financially secure in today's America! Wow! I didn't think it was possible with all of the complainers that commented on this post. We are in the same boat @GullibleGull! I expect that we will have a net worth of two times our yearly salary by the age of 33.

Quote #5

Might have been the best comment I found on the article! A lot of the retirement problems and money problems stem from an inflated lifestyle. Sure, it would be great to have two brand new cars, a McMansion, and the latest and greatest smart phone, but I don't really need all of that fancy new stuff.

We make choices everyday and a lot of those little choices are hurting our future self. For years, I have written about taking control of YOUR money and preparing for retirement without the plans of using social security or a pension. Government programs like these are not guaranteed to last and therefore I plan as if I'm not going to be able to use social security.

Some of you may say, "That's my money that I paid into social security." Yes, you paid money into social security, but I suggest treating it like a tax that the government uses to help the elderly in retirement. At some point, you will be in retirement and the younger generation will be paying the SS tax that allows you to enjoy a social security check. 

As I noticed while reading each comment under the article, not everybody is excited to be working until the age of 70. Well, there is some good news! You don't have to retire at age 70! You can retire earlier. I have listed four strategies that you can use today to become wealthy enough to retire on your OWN term.

Strategy #1: Start Saving for Retirement ASAP

The more you save at a younger age, the more you will have in retirement. Check out the great resources below that I have written or other bloggers have written about the importance of saving early and often.

Strategy #2: Save 20%, Nope 30%. Hold on, 30% is not enough let's shoot for 40%! nah let's go with 50% of Your Income Every Month.

As of right now, my wife and I are struggling to reach 30% savings, but in our late 20s, we were saving around 50% of our income. The beautiful thing about compound interest: Early savings turns into a large chunk of money in retirement. Basically, be different and shoot for a higher savings rate than 10%. 

Further Reading: The Shockingly Simple Math Behind Early Retirement - Mr. Money Mustache

Strategy #3: You Have to Believe in Yourself

The first two strategies above may be difficult to anyone struggling just to make ends meet. It may be difficult, but you can make a change for the better. You can find $100 every month to save. You can cut down your spending. Anything is possible if you put your mind to it! 

Don't let a lack of hope keep you from retiring before the age of 70!

Related: One Thing We Can Learn From Rogue One


This may seem like a generic broad statement, but you should have your retirement income coming from multiple different buckets. Those buckets include:

  • Invest in a workplace sponsored 401K/403B/TSP/Simple IRA.
  • If not offered a workplace sponsored retirement, invest in a Roth IRA or an IRA.
  • Within your investments, diversify the types of funds you use.
    • For Example, you could use the following funds: Emerging Market Funds, Growth and Income Funds, Growth Funds, and Value Funds
    • You could also use a target date retirement funds that are pre set up by investment companies.
  • Real Estate Investments (You can use the cash (rental income) in Early Retirement)
  • Non-Retirement Investments (I have a little bit of money invested in non-retirement investments, because I want to be able to use the money off of these accounts in early retirement.

Basically, don't rely on one type of retirement investment.

Strategy #5: Wait to take Social Security Benefits until 70

I guess the infamous author, Alicia was right. You should wait until 70 to start taking out Social Security benefits. Now, this does not mean that you have to retire until you are 70. No, you can retire at 50, live off of your "gap" savings (Roth IRA contributions and Investment income) until age 59 and a half. At 59 and a half, you can start using your 401K, IRA and Roth IRA earnings to live on. 

The law has not changed on using your actual savings for retirement. Thus, use your savings for the first ten years of retirement and follow that up with the social security benefits at age 70 to supplement you retirement income. Social security should never be your only income in retirement.

Note: I suggest that you can retire at age 50 as an example. This requires you to save 20, 30, 40, 50 or even 60% of your income each month! You can do it! Save like a bandit and early retirement is in your grasps.

Is Retirement looking bad for Millennials or anyone for that matter?

Personally, I don't believe there is a retirement crisis in America. We live in the greatest time period in American history, where anybody (yes, anybody) can become a millionaire. However, there are some people that are not saving and not preparing for their future.

Related: We Can All Be Millionaires and Three Retirement Myths Millennials Must Avoid

Thus, the answer is yes retirement is looking bad for millennials, but it's also NO! It's a yes for everybody complaining that the little person can't get a head. It's a no for everybody that has decided that they won't rely on the government for their retirement future.

It's a yes for anybody that worries about stuff instead of investing for their future. It's a no, for anybody that avoids frivolous purchases and saves loads of money every month!

Where do you stand? Are you struggling to save anything or are you blasting your way towards early retirement?


Sign up with your e-mail address to receive weekly news and updates

* indicates required

Powered by MailChimp