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Encore: Do millennials really deserve a ‘gold star’ for retirement saving?

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A recent opinion column in the New York Times argued that the millennial generation, contrary to popular reports, “gets a gold star for retirement preparedness.” This argument was based on comparing 401(k) holdings at ages 22-37 of $6,933 for millennials to $3,970 for members of Generation X.

I would be delighted if millennials were doing well in terms of saving, but I don’t think they are. All workers face a world in which Social Security will provide less relative to preretirement 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 also have substantial student debt, began their careers in the tough job market following the Great Recession, and are less likely to have workplace retirement and health benefits.

Read: This word describes Social Security — but not everyone wants to hear it

The Federal Reserve’s 2016 Survey of Consumer Finances (the most recent available) documents the challenges that millennials face. Fewer millennial households are covered by a retirement plan (see figure below); millennials with 401(k) and/or IRA assets have lower total balances than earlier cohorts (see second figure); and, overall, millennials have much lower wealth-to-income ratios than their older counterparts (see third figure). In short, millennials are behind.

This picture may change with the release of the 2019 Survey of Consumer Finances in September, but at this point no one has any basis for making such a prediction.

Finally, have we really lowered the retirement-saving bar so much that we are giving out “gold stars” for balances of $6,933?

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