With Millennials turning 40 in 2021, CNBC has launched Make It Middle-Aged Millennials, a series that explores how the oldest members of this generation grew up in the context of the Great Recession and the Covid-19 pandemic , Student loans, stagnating wages and rising costs of living.
Older millennials entered adulthood around the time of the 2008 financial crisis, followed by unique challenges such as rising college costs and slow wage growth. The result: Millennials became the student debt generation.
Now that older millennials are starting their own families, they are suffering the consequences. Many not only pay off their student debts, but also plan their retirement and their children’s education.
It forces them to make tough decisions about their financial priorities: According to a recent survey of 1,000 U.S. adults ages 33-40, 23% of older millennials have capped their retirement contributions because of student loan payments by The Harris Poll on behalf of CNBC Make It also found that 27% delayed home buying and 24% cut back on building an emergency savings bank.
While it is not uncommon at this stage of life to weigh your family’s financial priorities, older millennials are “crushed on both sides,” says Cliff Robb, associate professor at the University of Wisconsin, Madison, who studies financial decision making.
Millennials must “plan for their own retirement, which will become more and more insecure for them with fewer and fewer safety nets. They have to provide for their children’s education, which is becoming more and more expensive, while they still pay off their children, “mostly their own education,” says Robb. “And they have to pay for the higher costs of bringing up these children in a market that they are not in the same market Level rewarded as in the past. “
A double blow
When much of the older generation of millennials went to college in the early 2000s, “they were right on the cusp of this huge surge in higher education costs,” says Robb.
“It got less and less subsidized and more and more you [would] Using loans instead of grants and scholarships, “says Robb.” The millennial generation has borne the brunt of this shift. “
Now that many are still paying off those loans, they are also thinking about how to pay for their children’s education and don’t want their children to end up with the burden they had.
According to a Harris / CNBC Make It poll, 77% of older millennials said they would postpone their retirement to pay for their children’s education if they had to.
Tanya Wells, 42, and husband Jeremy, 41, know they’ll likely have to postpone retirement as they pay off their student loans and prepare to take on more debt for their two children, ages 15 and 17, to go to college to go.
The Wellses later went to college, graduating in 2017 with a $ 275,000 student loan.
While technically on the borderline between Millennial and Generation X, the Wellses experience reflects the impact of this crisis on many older Millennials. “We have these soaring college debts and now our two kids are in high school so they’re preparing to go to college too. We’re thinking of ways to balance that and the idea of retirement,” says Tanja.
She says she plans to take out student loans herself to help fund her children’s college education.
Christopher “Topher” Flamini, 33, is putting $ 100 a month into a Roth IRA to save for the education of his 20-week-old daughter.
Flamini graduated from Temple University in 2010 with around $ 45,000 in public and private loans but made a point of paying them off as soon as possible.
“My average monthly payment was about $ 500 or $ 600 a month,” he says. “I remember graduating and thinking, what should I do?”
Flamini worked at Subway for a little over $ 10 an hour straight out of college, but in 2011 he got a healthcare data entry job that allowed him to work his way up and pay off his loans on a regular basis.
He now owes about $ 7,300. His wife Nicole has no student loans.
“It has been a trip really, and I look forward to minimizing student loans for my daughter,” he says.
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Christopher Flamini in 2010
Juggling financial planning with slow wage growth and fewer safety nets
In addition to student loan debt, older millennials were just starting their careers when the Great Recession hit, which is likely to have a negative impact on long-term income.
And, more broadly, millennials have seen some of the worst wage increases in US history.
With the cost of living increased, we have “not seen a fantastic rise in wages since millennials entered the world of work,” says Robb. “We have seen more wage stagnation. So not only have people paid more for their higher education, but they are also not being rewarded as much as we have seen in the past.”
Robb also stresses that older millennials may not have the same social safety nets as previous generations. For example, social security reserves could be exhausted by 2035.
“You can’t rely on social security to be the same level that your parents or grandparents received,” he says. “That means more emphasis on personal retirement provision. If I don’t, I probably won’t have enough in retirement. Also, employer pensions have become less attractive because employers have switched to defined contribution contributions, away from fixed contributions.” Services.”
These realities are why the Wellses enrolled in college for the first time when they were in their thirties – to increase their earning potential.
In 2008 Tanya Wells lost her job in logistics and Jeremy lost his job as a construction worker. They used up their savings and 401 (k) s to survive.
“We never wanted to go through that again. We made a decision to recreate ourselves,” says Wells. “We knew the college debt was going to be huge, but we also realized that the outcome would be worth the sacrifice.”
In 2017, Wells graduated from the University of Virginia with a bachelor’s degree and now earns around $ 60,000 a year as a program coordinator at Duke University Hospital. Jeremy is in his sophomore year as a medical professional and earns about $ 50,000 – though he could be making a lot more soon.
“It feels good that we have some job security,” says Tanya. But with six-figure loans, two kids, and a late start, retirement isn’t assured. And Wells doesn’t expect to ever get any benefits.
“We went through all of this to make sure our families would never have to face poverty again,” says Wells. “And so we will work until we can no longer work.”
The Wells family
Photo courtesy Tanya Wells
For Flamini, he knows that his ability to continuously grow his income was key to his financial planning. He currently makes over $ 90,000 a year, which in addition to saving for his daughter’s education, also allows him to save for his retirement. His wife As a healthcare payment accuracy specialist, makes approximately $ 70,000 annually.
“Early, [student loans] certainly the amount of pension I could afford from paycheck to paycheck, “he says.” But over the years it hasn’t affected my ability to save for retirement. I’ve always prioritized saving for an emergency fund and retirement. In addition, I am fortunate to be able to grow my income year after year with new jobs and wage increases, which has opened the door to more pension contributions. “
Although he is proud to have paid off most of his loans himself, Flamini supports making education more affordable for the next generation.
“Although the student debts are reasonable at times, the level a lot of us were at was just so over the top, and it makes life really difficult for some people. I’m very grateful for my experience because I’ve been fortunate and fortunate with it but not everyone, “he says.” There just has to be a better way for us as a country. “
Millennials are “part of this competitive generation that just didn’t have the opportunities other generations before us because we were always underwater,” says Wells. “But we went through it all to make sure our family never had to fight again from now on.”
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source https://collegeeducationnewsllc.com/older-millennials-must-balance-student-loans-and-saving-for-retirement/
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