Will Millennials ever be able to retire?

Millennials have grand aspirations for their retirement. Not only do those born between 1981 and 1996 say they want to retire earlier than other generations (aiming to leave the workforce a little after age 61), they also want to have a more nomadic retirement, eschewing home ownership to travel the world and live in a variety of places.

But those dreams are running into harsh realities. As researchers from the Brookings Institution, the Harvard Kennedy School, and Johns Hopkins University summarized in late 2018:

“[Millennials’] careers have gotten off to a rocky start because of the financial crisis and Great Recession in 2007-9 and the ensuing slow (but steady) recovery over the subsequent few years. They will be employed in contingent workforce jobs (which have weaker retirement benefits than traditional jobs) to a greater extent than previous generations. They will be required to manage and navigate their own retirement plans to a greater extent than previous generations, while also likely having longer lifespans. They face an economic future with projections of lower rates of return and economic growth than in the past.”

As a result, by a variety of measures, Millennials are behind where other generations were in saving for retirement. When Baby Boomers were the same age as Millennials, they held 21% of the nation’s wealth. Millennials own a meager 5%. And while about 45% of Boomers and Gen-Xers participated in a workplace retirement plan at age 31, just 33% of Millennials did. Moreover, almost half of Millennial households aged 25-35 have student debt, and the average outstanding loan balance for these debtors amounts to more than one-third of their earnings.

Millennials’ savings crunch looks even worse when you consider the projected sorry state of Social Security. Within the next 15 years, barring any cuts to benefits or increases to the age at which retirees can collect, the retirement program’s trust fund is expected to run out, necessitating an immediate 25% reduction in benefits to keep it solvent, according to the Urban Institute.

As much as politicians prefer to dither and deny when it comes to Social Security, it’s highly unlikely that they will allow this scenario to play out. More likely is that the age at which future retirees can begin to receive benefits will be raised to 69 from the current age of 67 (for people born after 1960), which does make sense when you consider that Millennials’ life expectancy at age 30 is a year longer than Gen-Xers’ and about 2.5 years longer than Boomers’.

Retirement in 2050

Millennials likely will start to enter retirement around 2050. When they do, what can they expect?

For starters, they can expect to receive Social Security, albeit with slightly fewer benefits. Changing the retirement age to 69 would reduce their lifetime benefits by approximately 7.5%. They also can expect to work longer than members of past generations (which surveys suggest they’re fine with), and potentially to have part-time jobs in old age to supplement their retirement income.

Working in their favor, Millennials are having fewer children, which will reduce the burden of childcare costs. They also are less interested in preserving their wealth in retirement compared to Baby Boomers, effectively reducing their savings needs. And apocalyptic assertions that Millennials will be bereft of Social Security will not come to pass. So, Millennials will enjoy a retirement. But exactly what it will look like is still up in the air.

“A lot will depend on their future savings patterns, financial market returns, and how long they work. It will also depend on the extent to which Congress preserves Social Security’s scheduled benefits,” researchers from Boston College’s Center for Retirement Research wrote.

As they have through a Great Recession and a once-in-a-century pandemic, Millennials will make do.