Bloomberg magazine covered last month some of the financial trouble that high-income millennials ages 30 to 34 fear they will face in the near future.
Many are scared that they’ll have to work forever because they won’t be able to save enough to retire. The individuals surveyed in a recent study consisted of millenials of single households making at least $100,000 or $150,000 for those who are married or partnered in this age demographic.
The Spectrem Group, a wealth advisory company, ran this survey and did an in-depth survey of the age demographic who entered adulthood during one of America’s most devastating economic crises. Some of these fears are natural when considering that most millenials in this age cohort graduated from college in the middle of the Great Recession when hiring opportunities were not so great. According to this study, half of high-income millennials ages 30 to 34 worry that they won’t have enough savings for retirement.
Here are several thoughts about these findings.
Due to the prevalence of many young professionals heading to work in major urban centers, they will inevitably face cost of living problems. Big cities like New York and San Francisco have become notorious for this. However, not all big cities witness this trend.
When we go down to the Sun Belt, major cities like Dallas, Houston, and Phoenix tend to be quite affordable in comparison. Why could that be? Well, land-use restrictions play a major role in artificially making housing markets more expensive. Unlike their coastal counterparts, Sun Belt cities are known for their light regulatory touch on matters ranging from housing to tax policy. As a result, the aforementioned cities have more dynamic job markets and attract more talent from across the nation.
Their affordability only sweetens the deal, as many young professionals can then start families without having to worry about the financial implications of such a decision.
From a more macro perspective, there’s the impact of easy money that few talk about. Central banking creates perverse incentives by artificially lowering the market interest rate. This induces people to save less and consume more. Under normal circumstances, people would be saving more and in turn facilitating more production. As Jeff Deist, the President of the Mises Institute soundly argued, “Civilization requires accumulation and production; de-civilization happens when too many people in a society borrow, spend, and consume more than they produce.”
In the meantime, millennials will have to exercise a strong degree of personal responsibility to ensure their financial health in the decades to come. All change begins with free individuals who recognize the problems in front of them. In taking control of their finances, the younger generations can build a more prosperous future for themselves and their posterity.
But it all starts with establishing a solid financial foundation at the individual level.
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