Some Millennials and Gen Z don't see the point in saving for the future(businessinsider.com)
businessinsider.com
Some Millennials and Gen Z don't see the point in saving for the future
https://www.businessinsider.com/millennials-gen-z-no-point-saving-climate-change-inflation-homeownership-2022-5
23 コメント
Our future is fucked. There isn't a point to it. We don't make enough money to develop meaningful savings, so many people in my generation (Millenials) just don't see the damn point. We won't ever have a house, so where are we supposed to live during retirement? None of the retirement options available to us are designed for people that don't own a home, so fuck it. I'd rather have a decent life now before the planet goes to shit and my country strips my right to marry. The future is later me's problem, and worst case scenario, to quote the eternal George Carlin: "Eh, guess I'll just die."
Pretty much every job offers a 401k, so not saving is akin to not having a job...
Considering the youngest millennials are in their late 20s, and the majority of us are in our 30s. There are a good amount of us that moved up in our career paths and bought a home. Considering most buy a home in their 30s-40s, that is where more millennials already sit. What currently sucks is us younger millennials are not enjoying the cheap mortgages the older millennials are enjoying.
What really sucks is you pretty much need two incomes to make it work. You can easily get a job making 50k a year no problem. But that doesn't give you much these days. I make 80k and if it wasn't for my partner I would be paycheck to paycheck, and with kids out combine paycheck is still paycheck to paycheck. 110k doesnt do the trick. You pretty much need a household income of 150k to start having a okay life.
Considering the youngest millennials are in their late 20s, and the majority of us are in our 30s. There are a good amount of us that moved up in our career paths and bought a home. Considering most buy a home in their 30s-40s, that is where more millennials already sit. What currently sucks is us younger millennials are not enjoying the cheap mortgages the older millennials are enjoying.
What really sucks is you pretty much need two incomes to make it work. You can easily get a job making 50k a year no problem. But that doesn't give you much these days. I make 80k and if it wasn't for my partner I would be paycheck to paycheck, and with kids out combine paycheck is still paycheck to paycheck. 110k doesnt do the trick. You pretty much need a household income of 150k to start having a okay life.
Why would own a home make a difference? My manufacture date is in the early 90s and I’m saving for my retirement. With or without a home I don’t think I’ll be able to generate as much income later. Worst case I have a cushion if I ever want to make a risky bet. I don’t know what to use my money for other than travel anyway.
A home is a savings account on its own. Much like investments, a home's value nearly always goes up with the times as long as it is kept up. So much like a 401k the value increases over time, but paying a mortgage is like paying yourself while also paying the bank. The bank gets their interest rate cut, but the actual paying off the home is you paying you in the future.
So while a mortgage vs rent may be pretty close ATM if you are new home buyer (Yeah I wish I was able to buy a home 10 years ago..), your mortgage is putting money into your home as a savings account. And if you ever need some of that money for whatever reason, you refinance. It is real nice and easy
So while a mortgage vs rent may be pretty close ATM if you are new home buyer (Yeah I wish I was able to buy a home 10 years ago..), your mortgage is putting money into your home as a savings account. And if you ever need some of that money for whatever reason, you refinance. It is real nice and easy
That doesn’t answer why not invest at all if you can’t afford a house
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Given the inflation rate, this boomer is having hard time seeing the point too. So I'm spending more on capital infrastructure (tools for my shop) that I know will be even more expensive soon. It's hardly a sin of a particular generation to see that saving is less smart when inflation is multiples of the savings rate.
> saving is less smart when inflation is multiples of the savings rate.
How?
That's only the case when investments would lose money. Otherwise your rate of return offsets your inflationary losses.
(Right? Disclaimer: I have a 401k but otherwise don't know a ton about investing.)
How?
That's only the case when investments would lose money. Otherwise your rate of return offsets your inflationary losses.
(Right? Disclaimer: I have a 401k but otherwise don't know a ton about investing.)
I think the point the parent is making is that when the rate of inflation is higher than the nominal rate of return from your investment, your investment has a negative real rate of return. To put it another way, if you're socking cash in a savings account paying 0.6%, while inflation is 9%, you're losing money.
> To put it another way, if you're socking cash in a savings account paying 0.6%, while inflation is 9%, you're losing money.
Right, but you're losing 8.4% instead of 9%.
(And hopefully you're investing the cash more wisely than a savings account!)
Right, but you're losing 8.4% instead of 9%.
(And hopefully you're investing the cash more wisely than a savings account!)
Except you're still bleeding money. For perspective, "only losing 8.4%" of your wealth annually is like being on the Titanic right after the iceberg impact and plugging a small 1 inch hole in the hull of the ship. It's still sinking, and fast.
Compound interest works in reverse as well. Losing "only" 8.4% of your wealth each year means in 8 years more than 1/2 your wealth is gone. Thus, saving is basically irrelevant. By the time you'd have saved enough money to be meaningful, it is not worth anything.
Compound interest works in reverse as well. Losing "only" 8.4% of your wealth each year means in 8 years more than 1/2 your wealth is gone. Thus, saving is basically irrelevant. By the time you'd have saved enough money to be meaningful, it is not worth anything.
Well, that does seem to be the investment strategy the article is about.
I'm saying it's not rational.
The average rate of return for a 401k is around 5% - 8% yearly. So in this scenario, you'd be losing 1% - 4% yearly.
$10,000 initial investment after 10 years:
From the article:
In fact, a Fidelity retirement planning survey of about 2,600 adults found that 45% of "next gen" — defined as 18 to 35-year-olds — "don't see a point in saving until things return to normal."
Assume net $40,000 income per year and an investment of $500 per month at a 5% rate of return. Assume the person is 22 (just out of college) and retires at 65.
Their retirement account would be worth around $900,000 at retirement.
I understand the fatalistic attitude, but it would be smart to hedge one's bets.
The average rate of return for a 401k is around 5% - 8% yearly. So in this scenario, you'd be losing 1% - 4% yearly.
$10,000 initial investment after 10 years:
-1% -> $9,048.00
-4 -> $6,698.72
-8.4 -> $4,304.37
From the article:
In fact, a Fidelity retirement planning survey of about 2,600 adults found that 45% of "next gen" — defined as 18 to 35-year-olds — "don't see a point in saving until things return to normal."
Assume net $40,000 income per year and an investment of $500 per month at a 5% rate of return. Assume the person is 22 (just out of college) and retires at 65.
Their retirement account would be worth around $900,000 at retirement.
I understand the fatalistic attitude, but it would be smart to hedge one's bets.
that is not how a 401k works..
You are not at a loss if you don't sell....
Any buying in a down market is ALWAYS better for a younger generation.
S&P500 still has a 10y avg of 11-12%, that means every year that is the avg return. Even if there was 2-3 bad years, the 7-8 good years make up for it... So in 30 years time, it doesn't mater if we had a few bad years of -20% declines. You are still up massively.
Young people have such a lack of understanding when it comes to the stock market and it shows.
If your 401k only avg %5 return per year over a 30y span, you picked the wrong investment methods. Too much in bonds..
Still you should be taking advantage of employer match. Pretty much every employer has a 401k program, use it. SS will be there, but you don't want that to be your life line. Sadly Gen X didn't really understand 401ks, they got them later in life and many didn't fund them correctly. It isn't uncommon to see genXers take money from the 401k later in life with a hit, and it will be on their family to take care of them when SS isn't enough.
You are not at a loss if you don't sell....
Any buying in a down market is ALWAYS better for a younger generation.
S&P500 still has a 10y avg of 11-12%, that means every year that is the avg return. Even if there was 2-3 bad years, the 7-8 good years make up for it... So in 30 years time, it doesn't mater if we had a few bad years of -20% declines. You are still up massively.
Young people have such a lack of understanding when it comes to the stock market and it shows.
If your 401k only avg %5 return per year over a 30y span, you picked the wrong investment methods. Too much in bonds..
Still you should be taking advantage of employer match. Pretty much every employer has a 401k program, use it. SS will be there, but you don't want that to be your life line. Sadly Gen X didn't really understand 401ks, they got them later in life and many didn't fund them correctly. It isn't uncommon to see genXers take money from the 401k later in life with a hit, and it will be on their family to take care of them when SS isn't enough.
> that is not how a 401k works..
Sure it is.
Yep, I agree with your investment advice.
Sure it is.
Yep, I agree with your investment advice.
Why would I trade $10,000 of purchasing power today for $6698 of purchasing power in 10 years? What possible upside is there from this?
10 years is an artificial horizon. I chose it because it's the number of fingers and toes we have, and most people won't invest for 100 years.
The article is about retirement and how some generations aren't saving for it. How, then, are you going to use that purchasing power today to help yourself in 40 years, with the caveat that you can't save that money for retirement?
The article is about retirement and how some generations aren't saving for it. How, then, are you going to use that purchasing power today to help yourself in 40 years, with the caveat that you can't save that money for retirement?
In general, my observation is that retirement is either a fairy tale or for those who are incredibly rich.
I have plenty of savings, but I never expect to be able to retire. There is simply no way I could ever have enough savings for it to amount to anything. The last time I did the math was pre-COVID and I estimated I'd need no less than $4 million to retire.
Unless you count working until I am physically unable to work any longer, then living a very meager existence for a few short years and dying. That I fully expect.
I have plenty of savings, but I never expect to be able to retire. There is simply no way I could ever have enough savings for it to amount to anything. The last time I did the math was pre-COVID and I estimated I'd need no less than $4 million to retire.
Unless you count working until I am physically unable to work any longer, then living a very meager existence for a few short years and dying. That I fully expect.
Also keep in mind that if inflation is 9% and your gains are 10, you’re not paying taxes on the difference (1%) you’re still paying taxes on 10%, so your net gains might still be negative
I must not understand your comment. 401k's are a pre-tax investment vehicle. Withdrawals are taxed as ordinary income. If inflation is 9% and gains are 10%, all you're left with is 1%, which is what you'd pay taxes on when you withdraw.
(I'm using hand-wavy math here.)
(I'm using hand-wavy math here.)
You pay taxes on the gains and what you put in when you take it out. Say you get 10% return with 9% inflation, You pay taxes on 10% gains even though your gains were truly 1%. Also gains could be from any investments. If you have a Roth that you manage or is managed, your tax payment vs gains is worse as well.
To be even more pedantic, you pay taxes on the 109% later when you withdraw during retirement...
I'm in my mid 30's. My net worth is in the seven figures and I keep it invested across real-estate, stocks, and bonds but I still have so little faith in the future that my ultimate retirement plan is to just make peace with everyone in my life and use an exit bag when the time comes (when neither I or my husband can provide for ourselves). The only exception might be if our kiddo(s) have enough extra resources that they don't mind helping us but even then I'd be hesitant to burden them unless I can help with grandchildren or something in exchange for being kept around.
During the good decades after WWII our society relied too heavily on growth and became totally atomized. You need money for things that you used to get just by being a member in good standing with your community or by having a large family. When the economy stops growing local communities will take time to heal to the point where e.g. the elderly are cared for by default. I will most likely fall into the in between period when there are no options so early death would be the most humane option.
The thought of going from an upper middle class person on easy street to an impoverished lonely old lady is just too painful and I have zero faith in the United States and probably the world in general to not go down the tube to the point where all my investments become worthless. I'll keep hedging my bets of course but... the exit bag is the only sure thing lol.
During the good decades after WWII our society relied too heavily on growth and became totally atomized. You need money for things that you used to get just by being a member in good standing with your community or by having a large family. When the economy stops growing local communities will take time to heal to the point where e.g. the elderly are cared for by default. I will most likely fall into the in between period when there are no options so early death would be the most humane option.
The thought of going from an upper middle class person on easy street to an impoverished lonely old lady is just too painful and I have zero faith in the United States and probably the world in general to not go down the tube to the point where all my investments become worthless. I'll keep hedging my bets of course but... the exit bag is the only sure thing lol.
That's horrible logic. When the market is down is the perfect time to invest, if you expect things to "return to normal": you're basically getting things at a discount. Buy low, sell high(er).
(Also don't try to time the market, but baby steps.)