Looking at the Benefits of Long-Term Investing for Millennials that Hope to Retire

A lot of things have been said about millennials in popular culture: they’re entitled, lazy, hypersensitive, and ill-informed. There’s always a disconnect between older generations and younger ones, but the fact remains that millennials face a much different experience than Gen Xers, Baby Boomers, and the Silent Generation.

“What is different about us [millennials] as individuals compared to previous generations is minor,” wrote celebrated journalist and podcaster, Michael Hobbes. “What is different about the world around us is profound. Salaries have stagnated and entire sectors have cratered. At the same time, the cost of every prerequisite of a secure existence—education, housing and health care—has inflated into the stratosphere. From job security to the social safety net, all the structures that insulate us from ruin are eroding. And the opportunities leading to a middle-class life… are being lifted out of our reach. Add it all up and it’s no surprise that we’re the first generation in modern history to end up poorer than our parents.”

When they graduated from college in 2015, millennials found themselves staring down a frightening proposition: retirement won’t begin for another 53 years. Currently, the average age of retirement is 62. That means the generations before us spent roughly 40 years in the workforce before retiring. A NerdWallet study revealed that millennials won't officially call it quits from working life until they’re 75. That leaves millennials with a decade more time in the workforce. Meanwhile, retired millennials would be granted about five years of freedom from work if they live to be 80 years old (as estimated by the Social Security Administration).

The truth is there’s many contributing factors to the higher estimated age of retirement for millennials. And while it seems like circumstances are actively working against this generation, there’s still methods for lowering your retirement age and achieving financial freedom that begin with long-term investing strategies such as those taught by Record Options Investing.

Who are Millennials?

Known as Generation Y (Gen Y or Gen Why), the Net Generation, Echo Boomers, the Boomerang Generation, and slew of others, millennials are those people born between 1981 and 1996. Currently, these individuals range in age from 26 to 41.

As of 2021, there were roughly 72.19 million millennials in the United States, making this generation similar in size to the Baby Boomers (thus the nickname Echo Boomers). Worldwide, there’s 1.8 billion millennials which equates to nearly 25 percent of the global population.

This giant portion of the population comes under a lot of scrutiny over a myriad of topics from spending habits to socio-political stances. But Gen Y is working just as hard as their parents did to achieve lifetime milestones like retirement. For example, the average millennial began saving for retirement at the age of 24, a whole 11 years earlier than the average Baby Boomer. Like Gen X and Baby Boomers, millennials also average a 12 percent rate of saving for retirement.

Despite saving for retirement at the same rate as other generations, only 24 percent of millennials could demonstrate basic financial knowledge. Maybe that’s one of the reasons why millennials are only 60 percent confident in their retirement savings, compared to 65 percent for Baby Boomers and 69 percent for Gen Z.

So even though they’re saving for retirement, millennials don’t feel confident about retiring, which makes sense when you consider how unfamiliar this group is with basic financial concepts. As you’ll discover, these aren’t the only factors working against millennials.

Good Luck Finding a Job

In the Hobbes article we cited earlier, the author shared this quote from William Spriggs, an economics professor at Howard University and an assistant secretary for policy at the Department of Labor in the Obama administration: “A lot of [millennial] workers were just 18 at the wrong time. Employers didn’t say, ‘Oops, we missed a generation. In 2008 we weren’t hiring graduates, let’s hire all the people we passed over.’ No, they hired the class of 2012.’”

For those of you who don’t remember 2008, it was a magical time known as the Great Recession. Elder millennials had already experienced the fallout from the burst of the Dot Com Bubble as they entered the workforce post high school and college. In 2008, their younger peers, mid-generation millennials, experienced similarly disastrous outcomes as they graduated from high school and college only to discover there were absolutely no jobs available.

“You can even see this in the statistics, a divot from 2008 to 2012 where millions of jobs and billions in earnings should be,” Hobbes continued. “In 2007, more than 50 percent of college graduates had a job offer lined up. For the class of 2009, fewer than 20 percent of them did. According to a 2010 study, every 1 percent uptick in the unemployment rate the year you graduate college means a 6 to 8 percent drop in your starting salary—a disadvantage that can linger for decades. The same study found that workers who graduated during the 1981 recession were still making less than their counterparts who graduated 10 years later.”

The result of this significant decrease in jobs and starting salaries results in what Professor Spriggs describes as, “cohorts that never recover.”

Despite being the most-educated generation in history, with 39 percent of millennials having a Bachelor’s degree or higher, this group also has significant student loan debt. Currently, 48 percent of millennials have student loan debt and the average balance per borrower is $38,877. Fifty-two years ago, students graduated college with an average debt of $7,458 per borrower (in May 2021 dollars).

College-educated millennials accrued more debt acquiring the qualifications they needed for jobs that weren’t available. Even though that’s undeniably bleak, the circumstances for this group were considerably better than those from the same generation with only a high school diploma.

“Since 2010, the economy has added 11.6 million jobs—and 11.5 million of them have gone to workers with at least some college education,” Hobbes details. “In 2016, young workers with a high school diploma had roughly triple the unemployment rate and three and a half times the poverty rate of college grads.”

Currently, one in five millennials is classified as poor, and this generation is also more likely to live in poverty than Gen X and Baby Boomers at the same age. And that’s just the beginning of the challenges for this age group.

High Costs Create Greater Wealth Disparity for Millennials

“Coming of age in the shadow of the Great Recession, Millennials entered the job market during one of the worst economic downturns in decades,” shared Thea Garon of New America. “And now face mounting student loan debt, sky-high housing and healthcare costs, and increasingly precarious work environments.”

We’ve already mentioned that the name Boomerang Generation is applied to millennials. But why? Because 16 percent of those with a Bachelor’s degree or higher and 31 percent of those with some college education or less live in multigenerational households. In 1971, those numbers were eight percent and 10 percent, respectively.

These millennials find themselves living with their parents because housing prices have drastically increased. When Baby Boomers were coming of age in 1970, the median monthly rent was $108. In 2020, that number had increased more than tenfold to $1,104. Comparatively, in 1972, the median income was $9,696.94 and 48 years later, that number has only reached $67,521. So while rent increased by more than a multiple of 10, income only grew by a multiple of seven in the same timeframe. 

Furthermore, the dream of home ownership that was afforded to older generations is exponentially harder to achieve as a millennial. For instance, a $20,000 home purchased in 1970 would cost $341,600 today. In the 52 years since 1970, home prices have increased 1,608 percent. In millennials’ lifetime alone, home prices increased 541 percent. 

That’s not to mention how much more expensive health care is now compared to 1970. Back then, the average person spent $1,875 (in constant 2020 dollars) on healthcare. Now, that average is $12,531. Given a consistent rate of growth, it’s alarming toust imagine what those costs will be when millennials begin to retire at the age of 75 in 2056 at a time in their lives when there’s usually an increase in doctors’ appointments, prescription medications, and other healthcare needs.

While the cost of everything else has increased for millennials, the same is true for retirement. Current estimates show that when they retire, the Net Generation will need between $120,000-150,000 per year to live comfortably. For those millennials earning the median income of $67,521 (or less) annually, saving that much money for retirement seems impossible.

So is Retirement Even an Option for Millennials?

Right now, two-thirds of working millennials report having nothing saved for retirement. That’s not meant to make younger investors feel bad. The reality is that only five percent of millennials are able to save “adequately” for retirement. 

It’s daunting to think about saving an estimated $3 million for retirement while you’re struggling to make ends meet in a world where expenses increase faster than wages. But ignoring your aspirations, whether that’s home ownership, retirement, or globetrotting travel, because of money is a bummer. No one should ever feel held back because of their finances. 

Maybe you’re thinking you’re in the clear because your employer provides a retirement savings program. Plus, there’s always Social Security. Once again, Hobbes explains why that’s simply not enough for millennials that ever want to retire. 

“In the coming decades, the returns on 401(k) plans are expected to fall by half. According to an analysis by the Employee Benefit Research Institute, a drop in stock market returns of just 2 percentage points means a 25-year-old would have to contribute more than double the amount to her retirement savings that a boomer did. Oh, and she'll have to do it on lower wages. This scenario gets even more dire when you consider what's going to happen to Social Security by the time we make it to 65. There, too, it seems inevitable that we’re going to get screwed by demography: In 1950, there were 17 American workers to support each retiree. When millennials retire, there will be just two.” 

Regardless of whether you’ve started building your retirement savings or not, you need to utilize additional investment strategies that generate returns you can dedicate to this purpose. Investing means you’re making your money work for you while you’re out there generating more income that you can invest further. As Warren Buffet once said, “If you don't find a way to make money while you sleep, you will work until you die.”

For Millennials, One Common Advantage of a Long-Term Investment is Planning for Retirement and Beyond 

There’s a seemingly endless number of odds stacked against millennials attempting to achieve the same milestones as their parents and grandparents. We understand that better than anybody. 

By mid-2020, Record Options Investing’s chief executive officer (Alli Andress) and chief creative officer (Justin Andress) found themselves very uncertain about their financial futures when the COVID-19 pandemic effectively wiped out all of their freelance writing jobs. Elder millennials themselves, these two student loan borrowers spent more than a decade each attempting to overcome the same challenges facing their generation with little financial success to show for all of those efforts.  

It was at this time, ROI founder and board president Brian Sands imparted his hard-won financial wisdom. He taught Alli and Justin about the benefits of long-term investing with options strategies. He explained that a single source of income throughout their lifetimes would not guarantee retirement. Most importantly, he taught them to take the reins of their financial future.

Are the circumstances for millennials ideal? No. Does that mean financial freedom is unattainable? No way! 

But any further delay of saving for retirement is going to work against you every day that you don’t start. You have to take action now, build your financial literacy, and plan for the future. 

One common advantage of a long-term investment is growing your wealth with minimal tax liabilities if done correctly in a traditional individual retirement account (IRA) or Roth IRA. Though you want to make sure you’re employing investment strategies that manage risk and yield consistent returns throughout the year. There’s not many investment vehicles that offer these benefits. 

That’s where Record Options Investing (ROI) comes in. Our revolutionary investment education course teaches retail investors with no financial background how to save for retirement with options. With the meme stock fiasco of 2021, options are often misunderstood and considered a gamble.

The truth is options can be risky if you don’t have a strategy, investing rules, and a comprehensive understanding of this investment vehicle. But ROI simplifies options education and strategy and empowers people from all walks of life to dream of a brighter financial future with the knowledge and skills needed to successfully invest in Wall Street. 

The time is right now to begin planning for retirement. Sign up for Record Options Investing’s one-of-a-kind 14-Day Option Investor course today.