We’re all sick and tired of hearing about millennials and baby boomers. Every day, there’s another story dissecting the complicated and conflicted relationship between the two generations. Yes, there are a lot of interesting angles to explore, but at this point it’s becoming tired. Even so, it’s hard to let it go, especially from a millennial’s perspective. The average millennial most certainly got the short end of the stick, and a lot of that can be placed at the feet of baby boomers.
Although the flame wars will likely never subside in the snowflake versus blue hair battle royale, we can look at the ways in which younger generations are learning from the boomers’ mistakes. There are plenty of mistakes to choose from, too. But perhaps the most consequential was the way in which the boomers handled higher education.
You’ve probably heard some variation of this anecdote from a boomer at some point: “When I was in college, I worked part time during the summer to pay tuition!” This, intended to be a dig at younger folks for being lazy, is remarkable for a couple of reasons. First, it reveals that some people have absolutely no idea how much a college education costs. Second, it tells us that going to college didn’t always cost an average of $25,000 per year at a public university (and almost $50,000 at a private school). In the mid-1970s, those numbers were roughly a quarter of that.
Somewhere along the line, higher education was turned into an extremely lucrative business, and millennials and Gen Z are getting stuck with the bill. New data from Personal Capital show this has resulted in a big shift in behavior — a huge difference between the way millennials and boomers prepared for the future. And it has to do with college planning.
The big question: Retirement versus education
- The key finding: 70% of millennial parents (versus 48% overall) say they would prioritize saving for their child’s college education over their own retirement.
According to the Personal Capital report, millennials are much more likely to prioritize saving for their kids’ education. And they’re doing it at the expense of their own retirement. Why? It goes back to everything we just covered. Millennials (and other younger generations) were shafted when it comes to higher education. So with an entire generation drowning in debt — the average 2017 graduate had more than $37,000 — younger parents are preparing for these costs for their children.
Let’s dig further into those numbers.
A quick look at the numbers
- 63% of millennials have more than $10,000 in student debt.
Again, the way millennial parents are prioritizing their children’s education costs over their own retirement savings shouldn’t come as much of a surprise. A full 63% of millennials are still dealing with more than $10,000 in student debt, and all told there is more than $1.2 trillion in outstanding student debt in the U.S.
Millennials bear the brunt of it. More than 33% have more than $30,000 in debt, according to data from Padilla. The results have been obvious. Millennials have put off marriage, buying houses and cars, and starting families in an effort to get a handle on their debt loads.
But we’re just getting started.
But wait, there’s more
- It’s not just student debt. Millennials are earning 20% less than baby boomers did at the same age.
While debt balances make for sexy headlines, they don’t tell the whole story. Another important element is that millennials aren’t earning as much as their parents’ generation did at the same point in their lives. In fact, data show they’re earning up to 20% less than the boomers did. That means there’s less money to pay off those student loans, less money to save for retirement, and less money to sock away for their children’s educations. That makes for a lot of tough decisions with fewer resources. And millennials appear willing to put their children’s future before their own.
Is that a good idea though?
Should we put education before retirement?
- While it’s easy to sympathize with millennials’ desire to save for their kids’ education, should they do so at the expense of their own retirement?
The data show us millennials are forgoing retirement savings to put away money for their kids’ educations. That’s noble, sure. But is it a good idea? Some would answer that with a resounding no. While saving for your kids’ education is important, so is saving for retirement. And the magic of saving for retirement requires an early start.
You also have a future, and if you miss the boat on saving for retirement now your 50-year-old self will be regretting it. Also, your kids still have options, such as getting scholarships or attending cheaper schools. You don’t necessarily need to jeopardize your retirement to bolster their college funds.
Speaking of retirement savings, how are we looking on that front?
- 10,000 baby boomers are hitting retirement age daily. Only 15% of them have more than $500,000 saved to live off of.
How are we looking? Not great. As you might have heard, there’s a budding retirement crisis. Thousands of boomers retiring daily isn’t helping, especially when you consider a mere 15% of them have enough saved to live comfortably. That’s assuming that health care costs and living expenses won’t make dramatic jumps, which they very well could. If you need one statistic to really paint a picture for you, try this: More than half of Americans have less than $10,000 saved for retirement.
Is there any good news?
Some good news
- New data suggest millennials are actually outpacing the boomers when it comes to saving for retirement.
Yes, there is some good news. Evidently, millennials and other young’uns have been taking notes. While the boomers dropped the ball when it came to saving for retirement, millennials are outpacing them, despite considerable student loan debt and lower average earnings. A recent study from NerdWallet found millennials are throwing a median of 10% of their incomes into retirement savings, while boomers are saving half of that. More than a third of millennials are saving at least 15%. So the future might be brighter than we anticipated.
Finally, when will the friction between boomers and millennials come to an end?
Millennials and baby boomers: Frenemies until the end
- The boomers will live longer than previous generations. Guess who gets to take care of them.
Will boomers and the “avocado toast generation” ever see eye to eye? Probably not. A lot of young people harbor some serious resentment toward their elders, and they probably always will. And the cherry on top for some of those millennials is they’re now (or soon will be) taking care of their aging parents. Those boomers who didn’t save for retirement or lead healthy lives need places to go and people to take care of them after their working years are exhausted.
A 2015 report from Ameritrade showed 19% of millennials are supporting their parents financially, spending more than $18,000 per year. You can expect that percentage to creep upward in the coming years.
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