Can I – or Will I Ever – Retire?

Regardless of age, when I talk to people about their financial lives, the word retirement usually comes up. If they are over the age of 50, the question is “Can I retire?”, but if they are younger, the question becomes, “Will I ever retire?” The difference has a lot to do with the luck of a generation. For Baby Boomers (1946-1964) and older Gen X-ers (1965-1980), the economic system has generally (not universally) worked pretty well. People started working, bought houses, contributed to retirement accounts and as a result, have been able to plan for a time when they could potentially take the foot off the gas and call it quits.

But for some younger Gen X, Millennial (1981-1996) and Gen Z (born after 1996) workers, there is a sense of “financial nihilism”, a deep sense that “the economic system no longer rewards prudence or long-term planning,” according to Morgan Camp of the World Economic Forum (WEF). This idea is consistent with the findings of a recent study from Northwestern Mutual which found 80 percent of Gen Z and 75 percent of Millennials feel behind. Many of these people turn to non-traditional ways to build wealth, from crypto bets, to prediction markets and online gambling.

Before you complain to me that every generation has its bad luck, let’s look at some of the numbers. Over the last 35 years, the cost of college education has skyrocketed, and many turned to education loans to finance those degrees. While grads earn more than non-grads, Camp notes that the median wage for a bachelor's degree holder, when adjusted for inflation, has barely moved from $58,138 in 1990 to $60,000 today.

The younger generation is also burdened by the idea that homeownership is part of the so-called “American Dream.” The Northwestern Mutual survey found that 75 percent of U.S. adults agree homeownership is essential to building wealth, but about half of Gen Z and Millennials say they can’t afford either the down payment or the maintenance of a home. That makes sense because according to Camp at the WEF “in 1990, the median American home cost 3.2 times the median household income. Today it costs 5 times the median income, and for someone aged 20-34, closer to 8 times their annual salary.”

Another reason some are channeling their financial nihilism into big bets on volatile products is that many of them do not have retirement plans. According to Torsten Slok of Apollo, “nearly half of working-age Americans don’t have a retirement account, with the shortfall most acute among younger, less-educated and lower-income workers.” Lack of access to a work-based retirement plan has long been an issue, according to labor economist Teresa Ghilarducci, who has been a passionate advocate for guaranteeing retirement security for all Americans. She has turned her important research into a bipartisan lobbying effort to make retirement accounts available to all workers, which for a long time seemed like a pipe dream, but with the advent of Trump Accounts, perhaps could gain some traction.

Changing the system will take time, so what’s the answer to navigating the retirement journey for all generations? First, it’s important for oldsters like me to take a breath before doling out advice to the younger generation. As economic commentator and author Kyla Scanlon has written, “Young adults aren’t confused or bamboozled by the risks they’re taking. They understand them. They’re responding to an economy where the usual advice no longer lines up cleanly with outcomes.”

Next, it is important to stop guessing, and start planning. Instead of doom scrolling or following some “fin-fluencer” on social media, crunching the numbers can provide agency. Using one of the many retirement calculators can provide valuable insights and the ability to see how the magic of compounding can work for younger, and older savers alike.