MillennialsÕ Readiness for Retirement Ð A 2019 Update

An earlier brief comparing Millennials in 2016 with prior generations at the same ages concluded that their challenging labor market experience and high student debt burden left them less prepared for retirement than earlier cohorts. The release of the Federal ReserveÕs 2019 Survey of Consumer Finances offers an opportunity to view this highly educated, ethnically diverse cohort after three years of a strong economy, just prior to the pandemic. This reassessment of MillennialsÕ retirement readiness occurs at a time when all workers face a world in which Social Security will provide less relative to pre-retirement earnings; 401(k) balances are generally meager; and Ð at any given time Ð 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 Ð born during 1981-99 Ð got off to a slow start. They left school with substantial student debt and began their careers in the tough job market that followed the Great Recession. These factors delayed major life milestones such as getting married and owning a home and limited their ability to accumulate wealth. In short, Millennials were behind. The question is whether they caught up during the last three years before the pandemic. 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 shows the racial composition and education for Millennials ages 28-38 compared to Late Boomers and Gen-Xers. The third section looks at the labor market outcomes for Millennials, showing that Ð despite their slow start Ð they appear to be catching up. The fourth section suggests that Millennials also appear to be catching up in terms of life events, such as getting married and buying a home. The fifth section presents debt and wealth information from the Survey of Consumer Finances, which shows that, despite better labor market outcomes and substantial retirement saving, MillennialsÕ enormous student debt burden still leaves them well behind previous generations in wealth accumulation. The final section concludes that as Millennials age, they are beginning to look like previous cohorts along many dimensions, but student debt continues to leave them less prepared for retirement.