Will Millennials Be Ready for Retirement?

Many of today’s workers will have inadequate income when they reach retirement, but the prospects for Millennials seem more challenging than for the generations ahead of them. All workers face a world in which Social Security will provide less relative to pre-retirement earnings, 401(k) balances are generally meager, and – at any given time – half the private sector workforce does not have an employer-sponsored retirement plan. They will also face much longer periods of retirement due to rising life expectancy, high and rapidly rising health care costs, and historically low interest rates. In addition to these general headwinds, Millennials – those born during 1981-1999 – also have substantial student debt, began their careers in the tough job market following the Great Recession, and operate in a labor market where a declining share of jobs provide pension and health benefits. These factors have delayed major life milestones such as getting married and owning a home and have limited their ability to accumulate wealth. In short, Millennials are behind. This brief compares the status of Millennials across a number of socioeconomic dimensions to those of previous generations at the same age. The approach uses simple figures to summarize a complicated story. The discussion proceeds as follows. The first section defines Millennials and the earlier generations that are used as a basis for comparison. The second section presents the results for education and labor market outcomes for those ages 25-35 in each cohort using data from the Current Population Survey. The third section looks at how Millennials are postponing major life events, such as marriage. The fourth section presents debt and wealth information from the Survey of Consumer Finances. The fifth section concludes that – despite being more educated – Millennials’ challenging labor market experience and high student debt burden have left them less prepared for retirement than earlier cohorts.