Will you really be worse off in retirement than your parents?
The most studied species of today 鈥� after Donald Trump supporters 鈥� has to be the millennial. (Third on this list: millennial Trump supporters, probably.)
Of particular interest is their financial standing. Standard take: It鈥檚 grim. They鈥檙e聽聽and buried in student loan debt.
I have to imagine that all factors into why 80% of U.S. employees under age 30 say they expect to be worse off in retirement than their parents, according to a聽, which shared age-group results with NerdWallet.
I am not under 30, but I am a millennial (generally viewed as those of us born between the early 1980s and late 1990s). I feel stressed out by this rapt coverage, even as I add to it. What I聽诲辞苍鈥檛聽feel is that I鈥檒l be worse off in retirement than my parents. And I 诲辞苍鈥檛 think you鈥檒l be worse off, either, fellow millennials.
Our biggest advantage is time
Unless I somehow manage to聽聽鈥� an Internet-famous but generally elusive concept 鈥� I鈥檒l be working for another 35ish years.
This isn鈥檛 math, exactly, but聽. You can invest $100 a month starting at age 20 and end up with significantly more money than someone who invests $500 a month (and substantially more overall) starting at age 50.
I didn鈥檛 start saving as young as I should have. I remember calling my brother from the hallway of my first job. He鈥檚 a banker and, at least in my mind, was a money expert simply by virtue of having some. I wanted to know if I needed something called a 401(k). He said yes; I ignored him.
But after a couple of years writing about why other people should save, I started doing it too. And even though I鈥檝e had to cut back at points 鈥� blame goes to a cute but increasingly expensive child 鈥斅爐hat early start will help make up for those dips.
The other advantage is the聽, which wasn鈥檛 introduced until 1997 but should 鈥� fingers crossed 鈥� be around for the whole of our retirement-saving years. It stretches the magic of time further, by allowing years of investment growth to be tax free when distributions are taken in retirement. When I didn鈥檛 have a 401(k), a Roth was my sole retirement account. Sometimes I could afford to fund it with only $25 or $50 a month. Now, I try to contribute to it after I鈥檝e sent enough to my 401(k) to get all the matching dollars available 鈥� a good strategy for most people.
Our parents have advantages too 鈥� and theirs might be better
One thing that gives older generations a leg up: Some have a pension, an employer-provided guaranteed stream of income in retirement, which you can imagine might make things pretty cushy.
Millennials are聽聽to have one of these plans. What we probably聽will聽have, despite popular belief and plenty of fearmongering, is Social Security.
In the Willis Towers Watson survey, 81% of those younger than 30 believe they鈥檒l retire under a Social Security system that is much less generous than it is now.
I think that is, well, probably true. Social Security is not exactly flush. The聽predicts the trust fund will run dry in 2034. But it also projects the program will stay afloat with tax income, paying 75% of scheduled benefits through the end of 2089.
Is Social Security a retirement plan? No. But it isn鈥檛 for our parents, either, even though they will and do receive full benefits. A reduced benefit is better than no benefit, and there鈥檚 a good chance the program will be there to help stretch what you鈥檝e saved.
A bigger hill, but the mindset to climb it
In a way, a bit of pessimism about the future is a good thing. When you think you鈥檙e at a disadvantage, you can either quit or work harder to keep up. The research suggests millennials are doing the latter.
We鈥檙e starting to save at a聽, about seven years earlier than our parents did. We鈥檙e聽聽to our 401(k)s, in line with older generations despite the fact that we have much more time until retirement. (A fifth of us 鈥� not yet the fifth that includes me 鈥� is contributing 10% to 14%.) Millennials have actually聽聽to their savings rate since 2013, compared with other generations.
It鈥檚 not totally a pretty picture. You might have noticed, as I did, that a lot of that research focuses on millennial聽workers who are saving. Poll a bunch of people who save in a retirement plan and you鈥檒l find 鈥� they鈥檙e saving in a retirement plan.
That鈥檚 not to discount the numbers, but聽, notably those who 诲辞苍鈥檛 have a steady job, 诲辞苍鈥檛 have access to an employer retirement plan, or have too much in student loan debt to even consider using one. As always with surveys, some of the people struggling the most aren鈥檛 represented: Only about聽聽have an employer-based retirement plan, and of those who are unemployed,聽聽have retirement savings.
If you鈥檙e in that group, or simply want to do better, here are a few things that have helped me increase my savings rate over the years: One is being realistic about how much I need to save (a聽聽helps with that). Another is聽, like increasing my 401(k) contribution by 1% a year or my IRA contribution by $20 a month. And of course, the optimal time to save more is when you have extra money, which sounds obvious but few of us do it. If I get a raise, or pay off a car or student loan, I will put at least some of that newly freed money toward my future.
Arielle O鈥橲hea is a staff writer at NerdWallet, a personal finance website. Email:聽aoshea@nerdwallet.com. Twitter:聽.
This article was written by and was originally published by聽.
