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Most Millennials are not on track when it comes to saving for retirement

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Most Millennials are not on track when it comes to saving for retirement.

That's no surprise. After paying bills, rent and making student loan payments, there's often not much leftover each month for young people, many of whom entered the workforce at a time of stagnant wages and high unemployment.

But a new report shows just how far off track they might be. About 66% of people between the ages of 21 and 32 have absolutely nothing saved for retirement, according to the National Institute on Retirement Security. The report is based on Census data collected in 2014.

"I see in practice that a lot of us are putting retirement down the goal priority list, in favor of paying off student debt or buying homes," said Douglas Boneparth, a certified financial planner and author of The Millennial Money Fix.

Waiting to save could significantly delay retirement. You'll be missing out on valuable years of compounding returns.

Related: Millennials may look financially healthy, but...

Many people aren't overspending or living a frivolous lifestyle, yet still can't afford to put money toward all their competing priorities.

For those people, Boneparth finds "nothing wrong" with not saving for retirement as long as they're honest with themselves about what their financial goals are.

"I know it will delay your ability to achieve financial independence," he said. "But how are you going to tell someone who has a child that saving in a 401(k) is more important than their immediate needs?"

Most experts don't expect Millennials to be living the same kind of lifestyle in retirement as their grandparents. They may have to work longer to supplement their savings.

Related: What Millennials really want at work

But not all 83 million Millennials are behind.

About one-third are saving for retirement. Most have less than $20,000 but some have much more. The average account balance is $67,891, according to the report.

If they are saving, it's likely their employer offers a retirement plan, like a 401(k). More than 94% of Millennials who are eligible for a workplace retirement plan are saving. That's about the same participation rate as older generations.

But Millennial workers in particular often find they don't meet the eligibility requirements for a 401(k) even if their employer offers one. Sometimes they don't work enough hours, or employers require them to work for a certain amount of time before they qualify.

About 25% of Millennials said they were not eligible to participate in an employer-sponsored retirement plan because of their part-time status.

Loosening these eligibility qualifications would increase the number of Millennials saving for retirement, the report said.

Of course, people can save for retirement without an employer sponsored plan. Most people are eligible for Traditional or Roth IRAs, which also offer tax benefits for retirement savings.

Are you a Millennial struggling to save for retirement? Share your story here


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duerig
5 days ago
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There are two odd things about this. First, if you have student loans then it is obviously smart to pay them down before you save for retirement. So that is like being surprised that somebody in the desert is drinking water now instead of waiting until they get to a river.

Second, this article tells does not give us enough information to determine if Millenials are 'behind' or not 'saving for retirement'. There are lots of statistics about what people aged 21-32 are doing now (never mind that this is not actually what millenial means). But there is nothing comparing them to previous cohorts. If you give me an article about any particular cohort, tell me the data that makes that cohort special. Otherwise you can't distinguish between cohort effects and lifecycle effects. I could write a similar article complaining that fewer people aged 21-32 are married than people aged 33-45. Or I could boast that people aged 21-32 are currently enrolled in college much more than people 33-45. But neither of those is surprising since the average person doesn't get married until their late twenties and most people have graduated from college (or dropped out or never went) by their thirties. To get at a real trend, you have to compare cohorts.
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The Outsize Hold of the Word ‘Welfare’ on the Public Imagination

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The Outsize Hold of the Word ‘Welfare’ on the Public Imagination:

In her surveys, Ms. Mettler has found that people typically say the programs they’ve used have helped them. It seems reasonable to think that this sentiment might translate to appreciation for government — that the more programs people use, the more they might value the government that supplies them. But this is not what she found. Relying on government doesn’t make people more likely to value government, or make them feel more strongly that government is responsive to them.

Their feelings about government don’t appear connected to their own direct experience of it. But those feelings are shaped by opinions about other people’s reliance on government aid — specifically, on “welfare.”

That was the “one factor that just kept showing up again and again,” Ms. Mettler said of the data she describes in a recent book, “The Government-Citizen Disconnect.”

People who strongly dislike welfare were significantly less likely to feel government had provided them with opportunities, or to feel government officials cared what they thought, regardless of how much they’d relied on government programs themselves.

“Their attitudes about welfare end up being a microcosm for them of government,” Ms. Mettler said. “They look at how they think welfare operates, and if they see that as unfair, they think: ‘This is basically what government is. Government does favors for undeserving people, and it doesn’t help people like me who are working hard and playing by the rules.’ ”

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duerig
12 days ago
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Seeing our own experiences through the lens of a larger narrative seems to be increasingly normal these days. While I think that before it used to be that people saw the larger narrative through the lens of their own experience.

This is one big example. But attitudes about school systems or congress seem to be similarly disconnected. People usually feel good about their own congressperson and the school/district that their own kid attends. While simultaneously thinking that we have a crisis in our schools and that congress is irredeemably corrupt.

And when we do have experiences that link to larger narratives, we emphasize that link. The bad thing that just happened to you isn't just an isolated incident or just something bad that happens now and again that we have to deal with. it is part of a larger system of injustice. And sometimes this larger narrative is backed up (disproportionate arrests of minorities) and sometimes it isn't (conspiracy theories around autism and vaccines).

These changes can be either good or bad. It can foster a sense of grievance around problems that don't actually exist or which can't be solved. But it can also mobilize people to work towards fixing serious problems that do exist but are easily ignored by society if each is treated as its own special case.

It also works at cross purposes to institutional 'cooling out'. In 1960, an article described how many of the structures in junior/community colleges (and the first year or two of a 4-year college) acted as an institutionalized culling of students. And that this was done in such a way that each student tended to feel that it was their own responsibility. There are many more people who are interested as kids in being doctors, for example, than the schools can train or than society could use. So there are a lot of hurdles presented to students wanting to get into those roles. And if they fail at the hurdle, they won't be disgruntled about not being a doctor and are more likely to think that it just wasn't for them. You can think of this 'cooling out' as a sinister and underhanded trick pulled on excited students. Or as a way to prop up the prestige and salary of those who are inside the profession. But it is also the case that to have a functioning society, there needs to be a mechanism to make people who started out wanting to be the in the next boy band reasonably content with being a nurse instead. Because there are many more nurses needed than boy bands and it is best if nurses are reasonably satisfied.

The disgruntlement that comes with seeing ourselves in these larger narratives seems to be undermining the institutional 'cooling out' that has let us be content with our lives. And it seems to be universal, not limited to folks with concrete grievances that can be met. Does this mean a less stable society in the future? Or is it something more like a fad that will dissipate in time?
sfrazer
12 days ago
Achievement Unlocked: Comment more thought-provoking than the article.
duerig
11 days ago
Thanks. :)
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Remote destruction of a life by “... a complete stranger who had been offended by a comment Glennon had made about a news article on Facebook.”

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Must read.
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duerig
24 days ago
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This is exactly what is wrong with all the 'punch a nazi' rhetoric. The world is full of self-righteous people who are happy to punish strangers who may or may not be guilty of actually being a 'nazi'.
sirshannon
23 days ago
Yeah, they’re called ‘nazis’, you should punch them.
duerig
23 days ago
I appreciate your thoughtful response to a disturbing story about how one persons life was severely damaged by an online vigilante.
duerig
23 days ago
Sorry for my snarky response. The article detailed several different people and institutions online that are aimed at a kind of vigilante justice. The woman at the heart of it was targetted by a stranger online because she got into an argument about the appropriateness of taking a selfie at one of the concentration camps in Europe which was a controversy a few years back. The stranger took her to be anti-semitic and so posted a false story of adultery online to a website that apparently specialized in name-and-shame stories of adultery. And some random third party saw the story a year or two later and posted it to her facebook page, her husband, and her job. The woman was clearly not a nazi. And 'punching a nazi' in this case resulted in bad things happening to people who didn't deserve them. I would argue that the common result of vigilante action is injustice. No matter how righteous the cause. Our actual justice system moves slowly and may let bad people off the hook sometimes. But that is to try to prevent innocent people from being punished. It doesn't always succeed. But it is infinitely better than a snap decision by a random person.
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“making mortgage payments can, in theory, be a way to accumulate wealth almost as effectively as contributing to a retirement fund.”

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Mostly because of forced savings.
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duerig
24 days ago
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Forced savings is part of it. But a bigger difference is leverage. If I could get a 4.5% loan and invest it in the stock market for a guaranteed 8% return for 15 years, I'd be a millionaire. But it would be a risky bet because maybe the stock market would only go up 3% per year on average instead and then I'd have lost money on the deal.

The same thing can happen with a house. But add in the additional risk that your house or neighborhood might not go up in value even if the market does. And that in retirement your house is only as valuable as the rent you don't have to pay.

There are still plenty of good reasons to buy a house. But buying one if you only see the potential upside and not the risk is foolish.
freeAgent
24 days ago
Exactly. If there was a risk-free way to earn returns in excess of what I'm paying on my mortgage, I would keep my house perpetually mortgaged. Mortgages are definitely the easiest way for consumers to lever themselves. However, there are no such investments available, so I won't be taking out a HELOC any time soon. I don't believe that home equity is a particularly great investment in its own right, but the forced savings aspect of it definitely helps a lot of people.
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Letter From a Birmingham Museum

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The goal of most Narratives, in both markets and politics, is to convince you to sit down and shut up. The goal is to take you off the board. This was true in the 1960s civil rights movement and it’s true today. I’m not saying that you should fight the Man, whatever that means to you. I’m saying that whatever you choose to do, make it the active choice of a free-thinking human being.



Keep on reading: Letter From a Birmingham Museum
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duerig
46 days ago
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An implicit goal of all societies (both just and unjust) is to maintain a quiescent populace. When the populace is not quiescent for whatever reason, the society cannot function. Sometimes order is maintained through brute force. Sometimes it is maintained by offering participation and ceding control (voting, official meetings), sometimes it is maintained by social pressures and communication (true or false).

So if you live in a society that is clearly evil then standing up together with others can improve things. You are throwing sand into the gears in order to achieve a greater good. If you are living in a society that has both good and bad aspects, it becomes much more ambiguous. When you throw sand into the gears, you are undermining both the good and bad. When you work within the system and grease the wheels, you are complicit with both the good and the bad.
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Woodworking, the opposite of software development

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While waiting for the BoltBus, I met a former software developer, who said that he's now a carpenter. Specifically, he makes furniture out of wood, so a more precise term for his type of work would be something like woodworking.

He says he quit software because customers would keep making change requests on short notice, even for features he was pretty sure they'd never actually use.

I asked him if his new job has the same problem.

He said, no, it's the opposite.

Nobody asks for new features for their bench or table or whatever. They show him a picture of a 100-year-old table and say "Make me that."

Sometimes, a former customer will call and say, "Hey, remember me? You made a table for me three years ago." Do they want to modify the table? Nope. "Can you make one exactly like it for my sister?"

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duerig
55 days ago
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I have built tables and I have built software. They are really quite similar. Maybe the difference the author perceives comes down to the ease of reproduction.

Since software is so easy to duplicate, all of the demand for 'I saw this app and want one just like it.' is trivially satisfied. What is left is the thorny tricky custom stuff with institutional customers.

By contrast, things like a table are quite hard to reproduce. Either you have set up a lot of special tools and jigs to make a bunch of identical tables (Ikea) or you make a new unique piece every time that is nevertheless in the same style as some other piece (woodworker).

But in either case, it is really a difference in the market. Not a difference in the task. Both require some creativity and some drudgery. Both are crafts that are very satisfying.
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2 public comments
jhamill
56 days ago
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I would like to be able to make a table someday.
California
LeMadChef
62 days ago
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I'm not going to stop software development, but this sounds nice for a change.
Denver, CO
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