In contrast to baby boomers, who are now mostly too old to rack up appreciable increases in their 401(k)s – though they should try – younger Gen-X and millennials have time and compounding investment returns on their side.
This blog examines how they are faring – millennials, because saving and investing well now poises them for a secure retirement, and Gen-X because this “ignored” generation is sandwiched between the financial demands of parenting and parent care. Their own assessments of their retirement preparedness appeared in a recent report by the nonprofit Transamerica Center for Retirement Studies (TCRS).
“Millennials have heard the word that they need to save for retirement,” TCRS declared in its report summarizing its 2016 online survey of more than 4,000 workers.
Millennials’ ages are up through 37 in this survey. Nearly three out of four who have 401(k)s at work are already saving for retirement. They typically started saving at 22, indicating impressive foresight about retirement dates far in the future. Gen-X, ranging in age from 38 through 51, didn’t get started in earnest until they were 28.
While it’s great that millennials are saving for retirement, women in particular are not saving enough, said Catherine Collinson, president of TCRS. Among workers who participate in their employer’s 401(k) or similar plan, the survey finds that the typical millennial woman contributes only 5 percent to her plan, compared with 10 percent for millennial men.
Millennials aren’t taking advantage of their uniquely long investment time horizon, the survey finds. Retirement experts encourage younger adults to more aggressively invest 401(k)s in the stock market to enjoy decades of the long-term growth and compounding investment returns and potentially ride out the market’s inevitable volatility. Theoretically, if the stock market’s history proves true, equity-investing millennials can build up substantial retirement accounts, accumulating employers’ contributions and their own contributions and investment earnings over time.
But many millennials came of age during the 2008 financial crisis and still seem to be “in a state of shock with their concerns about the stock market,” Collinson said. One in five millennials say they are investing conservatively in bonds, money market funds, and cash.
Baby boomers will be the last generation with substantial access to traditional pensions. Gen-X is the first generation to heavily rely on defined-contribution accounts. …Learn More
A new report laying out loan data per student at more than 1,000 U.S. colleges can be useful to parents and future students.
From the California Institute of Technology and the California Institute of the Arts to the Massachusetts Institute of Technology and Bridgewater State University (also in Massachusetts) – data on debt levels for the 2016 graduating class at public and non-profit institutions are contained in a newly released report by the Institute for College Access & Success (TICAS).
TICAS has put together a handy interactive map summarizing the data. An individual college’s data can be found by clicking the state where it’s located and scrolling through the colleges in that state. Not all colleges are presented, because very few for-profit colleges report their students’ debt data.
Diane Cheng, associate research director of TICAS, walked through the most important things to look for when considering where to attend. But the bottom line is, “When students see colleges where a large share of students borrow, and they take out a lot of debt, that can be a red flag,” she said.
It’s virtually impossible to generalize about how much a prospective student will have to borrow, because every student has a unique combination of academic accomplishment and socioeconomic status. Also factoring into borrowing is each college’s sticker price and unique tuition policy. Tuition at public colleges is also affected by state funding, which remains 16 percent lower than before the recession, Cheng said.
She recommends starting with the following four indicators in the map:
Average dollars of debt after graduation: Click on a specific state or states on the map where the teenager is looking at colleges. Scroll through the colleges displayed for each state. What to look for in the data: Compare the average dollar debt level per student for each of the colleges your teenager is considering. If eight colleges are in the mix, compare average debt for all eight. Parents might even want to make a spreadsheet comparing average debt levels and the other data below for each institution of interest. …
Today, an ambitious financial education program operated by Delaware state government and the United Way of Delaware is bringing a message of financial empowerment for working people to a national stage.
The organizations have partnered with Ted Talk in Wilmington, Delaware, to film 15 financial education videos. The videos will be livestreamed on Sept. 12 starting at 10:30 a.m. Eastern time.
Since 2011, the state program, known as Stand by Me, has provided one-on-one financial coaching to some 16,000 Delaware residents, said Mary DuPont, who runs it. Today’s Ted videos grew out of DuPont’s 2016 presentation for Ted-X Wilmington.
The videos feature various proponents of financial education, including Javier Torrijos, chair of the Delaware Hispanic Commission, who will tell his personal story about the trials and aspirations of growing up as a child of Columbian immigrants, DuPont said.
Kevin Gilmore, executive director of Habitat for Humanity in Delaware’s Sussex County, will speak about his realization that preparing people financially to buy homes is just as important as building the physical structures. And “Why a Steady Job is No Longer Enough to Feel Financially Secure” is the title of a talk by New York University professor Jonathan Morduch, who has been featured on this blog.
The number of quality jobs held by workers with a two-year associate’s degree rocketed from 3.8 million in 1991 to 7 million in 2015. Total employment over that time didn’t come close to that rate of growth.
“There are still good jobs out there for workers who don’t have a four-year degree,” explains the above video by Georgetown University’s Center on Education and the Workforce. These jobs, which require a bit more education and training than high school, typically pay $55,000 per year.
The video and accompanying report, released in late July, introduce a three-year project to document and analyze employment opportunities for people who do not want, or haven’t been able to obtain, a college degree. This blog will watch for the center’s future reports on this important topic. …Learn More
On August 3 and 4, the Retirement Research Consortium will hold its annual meeting in which retirement researchers from around the country will converge on Washington to present their latest findings.
The papers being presented next week will explore the impact on retirement from our health, work-life balance, and family ties, as well the millennial generation’s prospects for retirement. These are just some of the research topics. Click here for the full agenda.
For those who can’t attend, the CRR will provide live streaming of the presentations as they occur. In late August, they will be archived on the CRR’s website.
The Retirement Research Consortium includes the Center for Retirement Research (CRR) at Boston College, which sponsors this blog, as well as the Michigan Retirement Research Center, and the National Bureau of Economic Research. The research being presented at the conference is funded by the U.S. Social Security Administration. Throughout the year, the findings will be covered in this blog.Learn More
The first study known to look at changes over several decades in lifetime earnings for the nation’s workers shows a dramatic trend: women are up and men are down.
The oldest people studied, mostly men, began working in the 1950s, when the post-war U.S. economy was going full throttle, and they started retiring in the 1980s when the industrial economy was only in the early stages of a protracted decline. The youngest workers studied are “middle” baby boomers, who came of age during the twin 1980s recessions in heavy industry and experienced the rise of the service economy and two high-tech booms and busts.
Over this time period, men’s earnings went through two distinct phases. In the first phase – which spanned the working lives of men born in 1932 through 1941 – the typical man’s lifetime earnings, adjusted for inflation, saw a 12 percent increase, the researchers found.
In the second phase, men’s lifetime earnings turned negative. Boomers born in 1958 have earned 10 percent less in total than men born in 1942. The decline is primarily due to men being paid less after accounting for inflation, and not from reductions in how many hours or how many years they worked, the analysis found.
In contrast, lifetime earnings for women born over the same 27-year period enjoyed “steady” and “broad-based” gains of 20 percent and 30 percent over the two sub-periods. …Learn More