How This Millennial Feels About Finances
By Megan Todd
We have been fortunate to have Megan Todd, a college senior and Millennial Generation representative, back to our company as a summer intern for the second time. At our request, she documented her viewpoint about the probable financial future of the younger generation. She presented her thoughts on our radio show, the “Van Wie Financial Hour,” on Saturday, June 18, 2016. My comments have been inserted in italics:
We always hear about how our generation is in big trouble when it comes to finances. We have seen the economy go up and down, and that makes us wonder if we will find a job after graduation. Students who went to college to earn degrees have not been able to make money while in school, and now worry about being on their own. We take whatever job we can find, not necessarily in the field we are interested in, just to pay the bills. On top of that, prices for everything keep increasing, so my generation is stressed out about making enough money to get by. We forget that there will be a time when we can’t work for our livelihood anymore because it seems so far away. Since the Great Recession of 2007 - 2009, our economy has yet to achieve even one quarter of 3.0% growth, and the resultant stagnant job market is reflected in Megan’s analysis.
One of my biggest worries is the talk about Social Security going bankrupt. Social Security was supposed to be this safe place for our money when we need it in the future, but most likely it won’t exist when we will need it. And, because there might not be Social Security, we have to work harder and longer hours to make up for the gap in our retirement savings. Worse yet, every Millennial has to fund about 1/3 of a current retiree’s current monthly income. It costs more money to retire than anyone in our generation can imagine. When the Social Security System was implemented, many people worked to support one person on benefits. Increasing retirements, coupled with a shrinking workforce, have resulted in the ratio dropping so that only three people now support one retiree. Further, the projections are that this number will further erode to two workers per retiree. The financial burden to young people is catastrophic.
How can our generation think about saving for retirement when we have just started looking for jobs? Do you think $250,000 sounds like a good amount? Most Millennials would answer yes, and that is because we have not dealt with that kind of money, ever. How can we understand that at $20,000 a year, that money would run out in a little over 12 years? $20,000 a year isn’t enough to live on now, let alone in the future with inflation. Having to think about this while sitting in an interview for a job makes you all the more nervous. We feel we have to have everything planned out with five back-up plans, just so we can relax in 50 or 60 years. Fortunately, new technologies, including “robo-advisors” and Target Date Retirement Funds, have provided easy entry into advanced Asset Allocation models for long-term savers. “Van Wie Financial” offers a robo-platform through Charles Schwab & Co., with very low cost and low minimum balances.
One thing my generation is good at is using the Internet. This is a great tool for research and referrals, but it becomes a base for too much information. We want to start saving early; what is the right way to do that? Stick the money in a bank and earn maybe 1% a year? It won’t grow fast enough. Thinking about an IRA (Individual Retirement Account)? Where do you get an IRA, how does it work, will it be enough? Do I put in some money now and then just leave it alone or do I need to put in money every year? If so, how much do I need to put in, how much can I AFFORD to put in? And then we start looking into the stock market, bonds, and CDs. And I’m sorry, if you don’t have a degree in finance; it is a hard world to understand. So do we just buy some stocks and see what happens? No, we want to make money, not just throw it away. So the question becomes, do we hire someone else to help us earn money? We are young and naïve; we hear so many stories about companies robbing people blind. So then we do more research, and it becomes even more confusing. Say you find a good financial planner to work with; there are still no guarantees in stocks, bonds, CDs or anything to do with money. No matter what we do, we could still lose it all or never have enough, and that is the scariest thing. Taking the first step with the uncertainty of it all is the biggest hurdle for me and many in my generation. Megan says a mouthful in this paragraph, and she is among the most financially savvy and experienced people of her generation. Our educational system long ago de-emphasized personal finance, and it was never involved with investment theory. Worse yet, the political world has condemned “Wall Street Greed,” ignoring the basic foundations of a capitalistic society, wherein Millennials actually have an opportunity for personal success. It is difficult to change the world one person at a time, but it is a challenge that we must all accept if there is to be a brighter future for our children, and for our children’s children.
As a Baby Boomer, I recognized long ago that our generation did many things very well. Our parents’ generation, dubbed the “Greatest Generation,” wanted a better world for their children, following the sacrifices they had made to keep us free. They educated their children, and like so many families, my brother, sister and I were the first college graduates in the family. The same held true for my wife’s family. We got educated, started families and careers, and were largely successful. However, along the way we made a potentially-fatal error – we pretty much ignored politics. It was easiest to ignore the creeping changes that compounded over decades, and led us to the verge of national bankruptcy. Taxes are punishing, Social Security is in deep trouble, and there is no political will to touch the “Third Rail” of politics (this nickname for the Social Security System refers to the electrified rail in urban trains). For those of us with some grey hair it is difficult to be very hopeful, but knowing people like Megan helps us remember that all is not lost. And that, to me, it the number one reason to do a live radio program each and every week. Please tell your kids to tune in – maybe we can help a few more get a good start.
Steve Van Wie