More and more is being written today about how millennials are different from the generations before them. But while much of the focus is on millennials’ different spending patterns, work ethic, or consumer choices, an increasing amount of focus is on millennials’ financial well-being. For the first time since the Great Depression or, according to some writers, since the Civil War, this generation of Americans won’t be assured of being as well-off as their parents. And the implications for the future of this country are frightening.
Millennials are more indebted at an earlier age than previous generations were, which is negatively impacting their ability to accumulate wealth. Whether it’s student debt, credit card debt, or other forms of debt, millennials are accumulating debt at a faster rate than previous generations. To a certain extent that’s only natural, as they are also facing far higher prices for education, healthcare, and housing than their parents did.
The effects on millennials’ ability to retire, however, is nothing short of catastrophic. According to recent research from a professor at the University of Pennsylvania, in order to retire at half of their salary, millennials will need to save 40% of their salary for at least 30 years. With millennials already so indebted, and with an average US personal savings rate of only about 8%, that means that many millennials won’t be financially able to retire.
Contributing to millennials’ inability to retire will be lackluster stock market growth over the next decade or more. Many investment experts are predicting anywhere from 1% to 5% annualized growth for stock markets over the next 10 years. That’s not a recipe for building up wealth either.
With millennials in such sad financial shape, the future of the US economy doesn’t look too great either. Consumers saddled by debt, barely able to afford the necessities of life, and unable to retire due to poor finances means that the prospects for future economic growth will be quite muted indeed.