The Retirement Outlook for 20-Somethings

As a twenty-something, I was excited when I saw the headline. I was hoping for substantive information on how, specifically, my age group should be preparing for something so far off. Reading morose musings about the death of social security and why the baby boomers have set us up to fail is neither uplifting nor useful. Can’t we instead focus on the fact that, since we’re in our twenties, we have so much time ahead of us to use compound interest? I’m really not fond of seeing my age group portrayed as whiners, and maybe I read this too quickly, but seriously man – cheer up. And please start writing articles that don’t make our generation sound like a bunch of helpless pawns of history.

Inheritence?! I’ll be lucky not to be having to send money to my parents to help them out… while also paying off my student loans, saving for retirement, saving for my kid’s college. I don’t think either of my parents (divorced) have much saved for retirement at all. Looks like it might be time to have some uncomfortable conversations.

At 27, with a lot of student loan debt, and no employer match to retirement contributions, I haven’t been saving for retirement. Right now, the biggest ROI available to me is to pay off my student loans as fast as possible. Someday, if I have an employer that matches retirement savings, I intend to take advantage of that as much as I can and as much as makes sense, since it can be that paying off debt faster means more significant benefit to my lifestyle overall even if that means I miss out on some matching). I won’t be able to help my parents, due to crippling student loan debt, nor do I expect them to have enough money to support retirement.

Someone could do the math, I’m sure, but I’m not going to do it now: I wonder what the economy would look like if we had kept up SS retirement age to match life expectancy (either proportionately or a steady 5 years past average life expectancy). If we kept retirement age proportionally steady, how would that change with increasing life expectancy and population increase? Has economic output per capita kept pace? How has the pie changed and how has the average slice changed? At least one problem with changing retirement age all at once (possibly at all) is that it would have the opposite effect it was originally intended to have: more older workers will push unemployment even higher for everyone. I’m not sure how much the quality of our later years of our life expectancy now compares with the later years of life expectancy then. What percentage of life expectancy in 1930 and now is of the quality required for working? I suspect that percentage is lower now because we have more ways of extending life at low levels of quality. Those people still need money to live on, probably a lot more because of the healthcare expenses. Increased life expectancy and general American attitudes toward “doing everything” in terminal healthcare situations have a lot of complicated economic effects.

This article really hit a nerve for me.
I’m 45, Mom is 66, Dad 71, very early boomers both. I guess I feel like, although they made some very good choices (classic millionaire next door stuff, frugal living, saving like crazy — 20% of income since 1960s, had kids young, drive cars for 300k miles plus, live in same house since 1972, very smart investing) and I have made much poorer choices, that they have been historically and generationally lucky as well.
Don’t get me wrong, I am very lucky. Had two loving parents (still happily married) who gave me everything in the world, paid for my BA (I paid for my graduate degrees). They have been nothing but generous in raising me to adulthood. But here I am at 45, unmarried, no kids, renting a dingy apartment, after 18 years of practicing law (and I’m really good at it) for my state I make just over 60k a year. Pathetic. At this age, my parents had all three of their kids, two of them out of college already, had paid off their house. Plus my dad had a very successful career and did very well; mom is a retired schoolteacher and gets a pension from the state. They both inherited money, not a lot, around 50k each, from their parents, who they never had to support. And my dad retired at 62.
I’ll most likely have to work until I drop. I can never live like they did or do. Part of that is my fault, but part of it is that I feel like I’m being squeezed by panicky late boomers who refuse to retire and free up job spots at the level I could if they were open. And the pay and health cost squeeze, plus the ever-rising cost of food and gas, have me worried all the time.
Now, having “lived like no one else then so they can live like no one else now” my parents have spent the last 9 years or so doing their best Marie Antoinette impersonation as they lay waste to their savings. They have travelled, always first class, mind you, to Alaska, Panama Canal, Scandinavia, France, Ireland, North Africa, Australia and New Zealand (3X), the UK, all over the Carribbean, Bermuda, Costa Rica, Italy (more than 5 times), Russia, Germany, Hungary, Austria, the Netherlands, even flippin’ Anatartica and the North Pole. Every trip is at least $10k as they go first class all the way.
It’s their money, they earned it, and I’m glad they’re enjoying it. Still, my Dad has told me again and again that they plan to spend every dime and not leave anything to us. When I point out that their parents left them something, he gets annoyed. I also remember as a kid the constant, we can’t afford this, we can’t afford that, fighting over the last sliver of soap, worrying that I was using too much toilet paper.
I know I sound like a whiny, entitled brat and I guess I am. But I can’t help but feel slightly bitter as I contemplate the choices they were able to make by virtue of time and place versus the ones that I’ll have to make. I will never be able to live like them.

Great article, thank you. It gives me the willies when I hear people of my parents’ generation talk about themselves like they were real estate wizards back in the 70s, 80s and 90s. Quite frankly, 1) you could have bought a tin shed in Australia in the 1980s and today it’d be worth a million dollars, 2) you didn’t save up the equity in your property–inflation did that for you.

I disagree with most posts here. I think the age of technology has made us more prepared than our parents or grandparents ever could have been about retirement. They didn’t have 401k’s, IRAs, and websites teaching them how to automate finances and leverage tax loopholes. We can switch jobs by throwing resumes out to 1000′s of companies simultaneously and move across the country comfortably thanks to yelp, craigslist, and other websites which allows us greater earning power and quicker promotions.

At 26, my wife and I both work, no kids, rent our house, and save 50% of our income for a down-payment on a house and retirement. We live in our favorite place in the world next to the beach and our families and I certainly wouldn’t say we are raking in the dough nor living on beans and rice.

I think if young people have an awesome opportunity to do the majority of their saving while they are young so that they can lean more heavily on the power of exponential growth. Having too high of a standard of living now is A) not sustainable once a family comes around and B) hindering from more years of that standard in retirement. If you can live it up now for 5 years and then lose that for 40 years of working and struggling to make ends meet or enjoy life on a more practical level now (when your standards are lower anyways) and live it up in 20-25 years for the rest of your life, which would you choose? And for clarification, we go out for dinner, go to the symphony once in a while, travel internationally, and do lots (not all) the things that we want to do.

We just budget for everything (even the unforeseen car breakdown) and try to cut out as much spending as possible on things within our control that don’t bring us as much joy. It all starts with a budget so you can see where you money currently goes and where it should go. Only then can you make the necessary changes and begin saving for a (hopefully early) retirement.