If you were to compare the two most recent generations against each other, you would find that the number of obvious differences is endless. Everything from core values and religion, to how we deal with matters of equality differ between Generations X and Y.
Generation X, or the approximate generation of our parents, was a very hard working generation that had a good amount of opportunities available to them that came from a long list of reasons that we are not going to get into. Generation Y…not so many opportunities anymore.
The biggest difference between the two generations –the baby busters and the millennials– is their spending and saving habits. This starkly contrasting behavior leads us to today’s topic of “Are Millennials setting themselves up for retirement”?
So are Millennials saving for retirement, or not?
The truth is that there is no blanket answer, but there is a majority answer of no, millennials are not making deliberate strides to set themselves up for retirement. Many observers who hail from a past generation may claim that this lack of foresight is due entirely to laziness, assuming that a majority of millennials are trust-fund kids who don’t need to work to live but rather just soak up the earnings of their parents. Looking around, the average 20-something (and even 30-something) still lives with their parents, but their living situation is not due to laziness or lack of trying to move on: it is due to the steady rising of the already-ridiculously-high cost of living, combined with the impossibility of landing a job that can make living independently affordable.
These two things together, along with the college graduate nightmare of “Can’t get hired because I don’t have experience – can’t get experience because I won’t be hired” have created the situation in which all millennials are currently residing. Only those that are truly able to think outside of the box are able to survive in this current economic situation, and that kind of behavior leads to the spending habits that millennials have: they are trying to focus on surviving for now.
The disconnect between the Now and the Future.
Millennials are trying to keep their heads down and work to provide stable support for themselves for the present. Even in doing that, it sometimes is still not enough. So they take up gigs to supplement their lifestyles like driving for Lyft or becoming delivery order takers for services like GrubHub or Eat24. Some are even renting out their apartments or homes on services like Airbnb for a few days while they crash at a friend’s place so that they can get a pay boost to cover this month’s rent. More opportunities to make quick cash continue to pop up in this modern world of gig economics and startup culture.
The rising cost of living and the kinds of jobs that are available make it possible to slide by and step paycheck to paycheck as the calendar years slip by, but not to thrive. The average millennial has a tough time earning a spot at a job that pays high above what is essential to get by, which means that when it comes to earning enough to pay the bills and save, the savings aspect is usually left out.
Only after they are employed for multiple years are they able to begin to earn enough to live comfortably and have enough to set aside strictly for savings for the future, but again, that only happens after a solid amount of time passes with them inside the workforce, considering that they can actually get in.
The “Right Now” Generation.
Due to the fact that the average millennial is not earning sky-high wages or is at a job that has benefits and retirement plans built in, the thought is that they should enjoy their situations now instead of toil and fret over the future. Making the best of the time that they are currently in with whatever they do have has become the mindset of millennials, and has dubbed them as the “Here and Now” generation (don’t believe it? Flip on the radio and listen to any song on the top 40’s charts. They’ll quote those words verbatim).
It is not that millennials are not thinking of retirement. It’s a thought that is hard to get away from, considering that everyone’s grandparents will always be quick to remind them that they should be preparing to retire instead of taking Uber’s to posh Airbnb destinations every weekend. Retirement is definitely a plan that every millennial is aware of, myself included. But with the way things currently are, there is just not that much opportunity to make retirement a genuine priority. It certainly is easier to focus on the here and now.
What does retirement really consist of?
There is a ton of emphasis on retirement here in the US. You can’t get away from personal finance advice columns that contain the words “401k” or “compounding interest”. Regardless of how one feels about retirement prep, they really should know about what it’s for.
Breaking it down, a retirement plan is the funds you will need to cover the costs of living once the primary income ceases to be available. This stopping of an inbound paycheck can result from disability, severance, or just a decision that you don’t want to work anymore. Either way, once you stop working, the money from paychecks stop, and that’s when you switch to the reserves you’ve been working so hard to accumulate over your lifetime. The funds will go towards covering the costs of medical bills, taxes, insurance for said medical bills, and any other light expenses you may have, along with any other expenses you have to pay for the rest of your life.
Pretty much anything you want to have when you are older, you either pay for it while you are working or make sure you have enough to keep paying for it long after you retire. Bottom line– your retirement fund is the pile of money that you use to keep you and your loved ones protected and financially covered.
It’s all about finding that Work-Life Balance.
A difference that needs to be noted is the mindset difference on work itself between Generation X and Generation Y, and it can best be explained through this: Ask anyone’s grandparents what they were doing for a living before they retired, and their answer will more than likely be “I worked in a steel mill” or “I was a manager for Sears”, or even “I worked in hotels my whole life”. Of course these answers will change greatly depending on whose grandparents you ask, but the common denominator of these vocations is that they are all jobs that for the most part, are not gigs that double as our answers to “what did you want to do when you grew up?”
This mentality of a “dream job” and working only where you truly aspire to is the difference between millennials and our parents and grandparents. Millennials have a dream or a career idea, and work hard to make their dreams into their professions rather than work labor jobs or gigs that are too far out of their dream career field. This mentality of “do what you love” is the difference between our prior generation’s mentality of “whatever locks down a secure paycheck.”
The desire for completely stable financial security is waived over the desire for a dream career with Generation Y, and gives way to the fact that if one really is doing what they love for a living, why would you ever want to retire?
Savings as a replacement for Retirement.
Our parents and grandparents worked so hard over their lifetimes so that they could retire and then start living. Millennials, myself included, have thought long and hard about our lifestyle choices and have decided that we shouldn’t wait until we retire to start living our lives. Working harder to obtain a work-life balance is worth the effort in millennials eyes, and makes retirement not that big of a deal. Gen Y-ers want to work doing what they love until they absolutely can’t anymore. If that means that setting up for retirement becomes not that much of a priority, then so be it.
Retirement plans rely on putting money into savings accounts that are grown over time. To many millennials that is more than enough. If you truly love what you do, then why would you ever want to stop?