How millennials’ troubled finances are a 'ticking timebomb' as they enter middle age: journalist

06 March 2023

A common complaint among aging Generation Xers — even those with advanced degrees — is that they haven't saved enough money to comfortably retire. There are many reasons for that: recessions, the high cost of living, low interest rates for savings accounts, student loan debt that took them a long time to pay off.

The generation that came after Generation Xers, Millennials, have many of the same problems — only worse.

Many Xers entered the workforce during the recession of the early 1990s, which was followed by the robust economic recovery of the mid-to-late 1990s. Democratic President Bill Clinton campaigned on how bad the U.S. economy was in 1992; when he ran for reelection in 1996, he campaigned on how much the United States' economic picture had improved. And millions of Gen-Xers helped incumbent Clinton defeat his Republican challenger, the late Sen. Bob Dole (R-Kansas), that year. Xers still had their problems — too much student loan and credit card debt, high rents that made it difficult to save for a mortgage — but the new tech jobs gave them a better standard of living than the service jobs they were able to leave behind.

Countless Millennials, in contrast, graduated from college during an economic crisis that was even worse than the early 1990s recession: the Great Recession of the late 2000s and early 2010s, which was the world's worst economic downturn since the Great Depression of the 1930s.

The older Millennials are now entering middle age and doing so with a lot of financial problems, which British journalist Kirsty Major addresses in an op-ed published by The Guardian on March 6.

Major describes the financial challenges that Millennials are facing in the U.K. as a "ticking timebomb." And her points easily apply to the United States as well.

"Millennials are old," Major writes. "The most senior in this demographic cohort are now pushing 42, and many will have careers, mortgages, children and may be starting to plan for the rest of their lives. Maybe they hope to follow in the footsteps of their grandparents and parents. Logging off work for good, they'll dip into their pension pot and enjoy a holiday somewhere warm or finally take up that long-delayed hobby. I'm here as the ghost of retirement future to tell you that there’s a strong chance this won't be happening."

Citing data from reporter Paul Davies in an June 2021 article for the British website Which?, Major notes that "an individual or couple respectively need £19,000 and £26,000 a year to enjoy a 'comfortable retirement' comprising regular short-haul holidays, hobbies and the odd tipple."

According to Major, "However, the problem facing Millennials is that their private, workplace and state pension pots are all likely to be less full than those of previous generations. The rule of thumb with pensions is that it's best to save as much as you can as early as possible in order to make the most of the eighth wonder of the world, compound interest. But try applying this guidance during a financial sector crash, a pandemic and a cost-of-living crisis. It’s not surprising that only about a quarter of Millennials have done 'a great deal of planning or thinking' about retirement when it costs so much to live in the now."

Major observes that many of the things that should come with middle age — more money saved for retirement, a mortgage and the equity that comes with it — are eluding the Millennial Generation.

"Exorbitant rents and house prices have caused delays in saving for retirement, and pose an ongoing threat to financial stability in the future," Major explains. "According to the comprehensive Resolution Foundation intergenerational audit, the proportion of Millennial family units living in the private rented sector at the age of 30 is more than three times the rate of the Baby Boomer generation — and they are paying more. Average monthly rent is now £1172 in the UK and £2480 in London. After retirement, lifelong renters will need an extra £9000 of annual income to cover costs compared to homeowners."

The British journalist adds, "Higher earners able to save for a deposit, or those who received help from the bank of Mum and Dad, may be better off than renters thanks to owning an asset, but they're not in the clear. Large mortgages will leave them financially vulnerable to rises in interest rates and falls in house prices."

Major offers some possible solutions, and her recommendations for the United Kingdom sound a lot like Sen. Bernie Sanders (I-Vermont) or Sen. Elizabeth Warren (D-Massachusetts) during political discussions in the United States. Sanders, for example, favors a national rent control law — a proposal developers would have no doubt fought against tooth and nail had he been elected president in 2020.

"Wages should be increased," Major proposes. "Rents need to be capped or controlled. House prices need to be stabilized to allow wages to catch up with prices and to avoid those who bought at the peak falling into negative equity. It may sound like a lot to ask, but the writing is on the wall: if this government doesn't fix the problem, then another one further down the line will have to."

Read Kirsty Major's full op-ed for The Guardian at this link.

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