The millennial generation has become the largest generational cohort in the United States. Much ink has been spilled trying to analyze millennials and their behavior. While many of the characterizations of millennials tend to focus on personality traits and work ethic, there’s no question that millennials are vastly different from generations that preceded them.
They aren’t making as much money as previous generations, are reaching major milestones such as marriage, child-bearing, and home-buying at much later ages, and aren’t saving and investing as much as previous generations. Overall, millennials are accumulating wealth at a much lower rate than previous generations, leading some pundits to speculate that they may become a “lost generation.” Is the millennial lack of wealth indicative of a shift overall in Americans’ views towards life, or is the millennial generation unique in that respect?
Timing Is Everything
As much as many financial advisers like to believe that everyone has the same challenges to get ahead in the workplace and save for retirement, the sad reality is that timing can be very important and is often underlooked. Even worse, it’s something that’s out of most people’s control. Millennials, more than perhaps any generation since those coming of age during the Great Depression, have fallen victim to that bad timing.
The millennial generation is often defined as the generation born between 1981 and 1996. They have had to endure a whole host of obstacles that previous generations didn’t have to, the greatest of which is the rising cost of living and, most importantly to millennials, education.
It’s no secret that college tuition has risen far faster than inflation, income, and savings. Whereas previous generations of parents used to be able to save for their children’s college educations, rising costs have made that increasingly unfeasible. Between tuition and room and board, the average cost of a four-year degree at many universities can easily exceed $250,000. That’s more than most families can afford, which means that more and more students are taking on huge amounts of debt in order to get a college degree.
They think that it’s worth it, of course, because the conventional wisdom is that getting a college degree will allow you to get better, higher-paying jobs in the future, more than paying for itself by the time you retire. As many millennials found out, however, that isn’t always the case. The oldest millennials graduated into the aftermath of the dotcom bubble. Many decided to go on to graduate school or get professional degrees, hoping to further improve their chances in a job market that is increasingly saturated with college graduates.
Financial Crisis Hammered Millennials
Of course by the time they finished those degrees, the economy was already starting to slump, and by 2008 it was fully in crisis. Many millennials found themselves laid off, facing massive amounts of student debt that they still had to pay off. Getting married, buying a house, saving for retirement, and other markers of adulthood had to be put off as many millennials moved back in with their parents to minimize their cost of living. Anyone who graduated college or finished grad school during the 2007-2012 time period faced great difficulty in finding a good job, a setback that could end up severely hampering their ability to save money and grow their wealth in the future.
The youngest millennials are just now entering the job market after college, and could very likely face an economic downturn in the next couple of years too. Because the key to building up a good amount of savings for retirement depends on starting early, these disruptions to the early savings habits of millennials could set them back for the rest of their lives. The question to be asked, though, is: are millennials unique and will subsequent generations be able to save more, or have we seen a sea change, with future generations being permanently worse off than their predecessors as the economy goes through continuing cycles of stagnation?
Save Early and Often
Regardless of what the answer to that question is, however, millennials need to start saving as soon as they can. If life deals you a bad hand, you still have to make the most of it. But unlike many baby boomers, millennials won’t be able to stick their money into stock markets and make it big with minimal effort. The stock market boom of 1982-2000 that enriched so many baby boomers and Gen-Xers was an anomaly, and something like it most likely won’t be seen again for many years to come.
But that’s no reason for millennials to hang their heads and give up hope of ever achieving the same lifestyle their parents had. Great returns are still out there to be had, it just takes a bit of hard work in doing research, and a bit of thinking outside the box, something millennials are supposed to be good at.
When stocks don’t provide the growth opportunities that they normally do, it’s time to look elsewhere, into alternative assets such as precious metals. Gold, for instance, has performed twice as well as stocks in the 21st century, at a nearly 10% annualized growth rate versus less than 5% for the Dow Jones and S&P 500. And with a gold IRA, existing underperforming retirement assets can be rolled over into a gold IRA tax-free, while still enjoying all the same tax advantages in the future as a traditional IRA.
The coming decades won’t be easy for investors, particularly for millennials who will face challenges that their parents didn’t have to. But while that won’t make for an easy road to retirement for millennials, the dream of a comfortable retirement isn’t entirely out of their grasp. It will take some extra effort and planning, but if millennials are willing to take those steps towards sound saving and investment then they can escape the fate of becoming a lost generation.