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Millennials: Who Are They Financially?

Millennials are generally the people born between about 1982 and 2004.  While they are a varied and diverse group, there are some common traits of the generation.  These traits would be somewhat unique for a Millennial seeking a relationship with a financial planner.

My statistics came from an October, 2014, report by the White House Council of Economic Advisors.  I consider their facts to be well-researched and documented, but I disagree with several of their conclusions and omissions.  Their report is available here: 15 Facts About Millennials

Here are some of their observations, as well as some of my opinions:

  • Millennials are now the largest and most diverse generation
  • They are shaped by technology, family-oriented, and well-educated
  • They are deeply in debt for School Loans
  • They are more likely to have health insurance during their young adult years; my problem with conclusion is that their coverage generally happens using parents’ policies, as the ACA, or “Obamacare” took the eligible age to 26 from 22 for remaining on the parents’ policy; I’d rather have the Millennials get their own inexpensive “catastrophic” coverage, which is unavailable in ObamaCare
  • Many Millennials started careers during the “Great Recession,” and are not highly paid; fortunately, they value education, which should allow them to catch up quickly
  • They are not changing jobs as often as past generations; I wonder if this is due to lack of available jobs that are more highly paid
  • Millennial women have more workplace equality than in previous generations; I believe that they are gaining largely because the “traditional” female career paths, such as teaching, are being replaced with Professionals, including physicians and attorneys
  • They tend to marry later and less often; this is due, at least in part, to changing attitudes about family composition and timing
  • College-educated Millennials are tending to move to urban areas; which makes sense if they are starting families later

I found the study observations to be better than the conclusions drawn from their facts.  It appears that this was commissioned designed to support the changes brought by ObamaCare.  I fear that these changes are going to slam this generation as they arrive at the advanced age of 27, when they lose their health insurance coverage on parents’ policies.  As double-digit price increases are taking place in many areas in 2016, and the “full” ObamaCare doesn’t happen until 2017, it will be very difficult for Millennials (and the rest of us) to afford private coverage or ObamaCare policies.

But my biggest complaint is the (I believe intentional) lack of mention of the effects of Social Security on the working lives (and subsequent retirement) of Millennials.  A search on the word “social” get several hits in the document, but none were in reference to Social Security.

With the Social Security Retirement System, and worse yet, the Disability System, heading to insolvency prior to the Millennials achieving retirement age, they are unable, in my opinion, to plan on Social Security as any significant portion of their retirement income.  For most people, that is the only lifetime-income cash flow they will have.  Without it, or on a dramatically reduced basis, they will have to save more, plan better, and invest well to ever consider retiring.

That upcoming problem is exacerbated by the lifetime earnings that Millennials will be forced to “contribute” to the Social Security System.  When the SS system began, about 30 people were working to pay benefits to one person.  Over time this has become closer to 3-to-1.  It is projected to go to 2-for-1 soon.  This suggests that every working Millennial will have to pay one-half of a retiree’s Social Security income annually.  For someone receiving $2,500 monthly, this would require that a Millennial would have to pay $1,250 per month (divided for the non-self-employed, between employee and employer), which simply is not reasonable in most occupations today.

There is only one non-governmental solution for this generation.  Start planning and investing for yourself.  Self-reliance is going to be the only path to a comfortable later life.  If you are a Millennial, or if you know one or parent one, “suggest” that they start immediately by calling a fee-only Certified Financial Planner.