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Opinion: Note to Millennials — What I Wish I Had Known Then About Saving for the Future

Focusing only on the crisis of today worsens the crises of tomorrow

For millennials confronting daunting financial challenges, saving for retirement is not a priority. But focusing only on the problems of today worsens the crises of tomorrow, Edelman and Grumet write. (Bill Clark/CQ Roll Call file photo)
For millennials confronting daunting financial challenges, saving for retirement is not a priority. But focusing only on the problems of today worsens the crises of tomorrow, Edelman and Grumet write. (Bill Clark/CQ Roll Call file photo)

A retirement crisis is on the way, and the generation most likely to be affected by it is the group that’s paying the least attention. For now.

It should come as no surprise that the youngest and largest generation in the workforce has trouble focusing on retirement. Millennials face unique challenges that we did not encounter at their stage. The vast majority of their generation entered the workforce during the Great Recession and its aftermath. Rising college costs and a tuition funding system increasingly reliant on loans have resulted in the largest student loan debt on record. Financial concerns have pushed out millennials’ timing for buying a home, getting married and having children. That’s why saving for retirement does not make the top of life’s list for this generation.

As personal finance and policy leaders, however, we have learned firsthand that focusing only on the crisis of today worsens the crises of tomorrow. Our generation will never be able to turn back the clock to reshape decisions that affect not just our retirement but the financial well-being of future generations. That is why we started the Funding Our Future campaign — to highlight what we wish we had known (and addressed) when we were the new generation of workers.

Nearer than you think

So, here’s some advice for those who feel retirement is far, far away.

First, save early and often for retirement. Unfortunately, our generation did not take that advice to heart. According to the Federal Reserve, less than two-fifths of Americans believe they are on track with their retirement savings, and a quarter have no retirement savings at all. The situation is even worse for millennials, as 41 percent of those under 30 report having no retirement savings. Failing to create retirement savings will cost you the compounding benefits that early investments provide. It is often this mistake made at age 25 that adversely affects one’s standard of living at 75. If your employer offers a 401(k), use it and take full advantage of any employer match.

Second, support public policies that make it easier to save. Federal and state policies play a major role in your ability to retire with dignity, and they’re falling short. Here’s one shocking statistic to illustrate this: More than a third of private-sector workers do not have access to any workplace retirement plan. With a retirement savings system driven primarily by paycheck deductions at work, this lack of access puts those seeking a financially secure retirement at a serious disadvantage.

Third, retirement planning isn’t as simple as accumulating a nest egg. Millennials are keenly aware that over the years the U.S. retirement system has fundamentally shifted away from pensions, which offered permanent retirement income.

But pensions have largely been replaced by 401(k)-type plans, which often leave workers on their own when they reach retirement. Turning those savings and other assets into a steady stream of retirement income can be a daunting challenge, so start thinking about this now. It’s essential if you want to retire comfortably.

Policymakers also need to make it easier to generate retirement income that you can’t outlive. Federal guidelines can and should encourage savers to understand their options and turn their savings into a lifetime of income, helping people to avoid outliving their money.

Don’t let it run dry

Finally, demand that Social Security be saved. The Social Security trust fund is in dire straits. It has been on a financially unsustainable path for decades, a reality which our generation has ignored. Millennials cannot afford to do the same.

The first millennials will begin turning 65 in 2046, 12 years after the trustees for Social Security say the trust fund will be depleted. If Congress does not act, automatic benefit cuts of 23 percent will kick in, starting in 2034. Millennials, and the generations that follow, will inevitably pay the greatest portion of the costs of this crisis, through lower benefits, higher taxes or both.

These challenges are clear evidence that reform is needed to ensure everyone has the ability to achieve a secure retirement. Millennials can make this happen by supporting commonsense changes to retirement policies that make it easier to save, maintain a lifetime of income and put Social Security on a sustainable path.

The Funding Our Future campaign publicly kicks off Tuesday, and already more than two dozen organizations have signed up to educate the public about the lessons we have learned and the changes we still need to ensure that everyone has the opportunity to retire with dignity. We hope millennials rise to the challenge, for the nation’s sake and their own.

Ric Edelman is the founder and executive chairman of Edelman Financial Services.

Jason Grumet is the president of the Bipartisan Policy Center.

The Bipartisan Policy Center is a D.C.-based think tank that actively promotes bipartisanship. BPC works to address the key challenges facing the nation through policy solutions that are the product of informed deliberations by former elected and appointed officials, business and labor leaders, and academics and advocates from both ends of the political spectrum. BPC is currently focused on health, energy, national security, the economy, financial regulatory reform, housing, immigration, infrastructure, and governance. Follow BPC on Twitter or Facebook.

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