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The financial outlook of millennials during COVID-19

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Welcome to Clearpath – Your Roadmap to Health and WealthSM. I’m your host, Al Waller.

Now Millennials, and we’re talking about those individuals born between 1981 and 1996, are often…and humorously, depicted as taking selfies of their avocado toast to post on social media.

But seriously, these types of sweeping generalizations are rarely accurate and probably aren’t the best way to characterize groups of people in general, especially when you take into account that this is the largest generation of Americans today.

Joining us today is Catherine Collinson who leads nonprofit Transamerica Institute® along with Mihaela Vincze to talk about Millennials, their finances, job status, retirement outlook and more. Listeners will also recognize Mihaela as Transamerica Institute’s public health expert.

And…full disclosure…she’s also “a Millennial.”

So, Mihaela, welcome back

Mihaela: Okay, Al. You caught me… I’ve been guilty of posting avocado toast on my social channels.

Al: I just knew it! But all kidding aside, talk to us about Millennials and what you think we should know about your generation?

Mihaela: First, I want to reiterate a point you made. Based on the birth years of 1981 to 1996, Millennials range in age from 25 to 40. I think Millennials will be surprised to realize that the oldest turned 40 this year and that Millennials span 15 years in age. Not only are we diverse by age, but we are also more racially and ethnically diverse than earlier generations.

Al: Incredible. I’m glad you brought that to our attention because I think many would be surprised that the oldest Millennials are already turning 40. And when you think back, a ton has happened in the world since they started working some— what, 20 or so years ago, right?

Now Catherine, your team has been conducting research for more than 20 years.

So, could you weigh in and share some of your insights on the topic?

Catherine: Well, thanks for the opportunity, Al. We have been following Millennials for 20 years as the oldest were just entering the workforce.

From a macroeconomic perspective, Millennials have experienced a roller coaster in the financial markets. I’ll start with their namesake year, 2000, the turn of the millennium, which was also the year that the dotcom bubble burst. Less than a decade later, they faced the Great Recession –and many had unprecedented levels of student debt.

Now, Millennials are contending with a global recession brought on by a pandemic. Over the years, Millennials have also experienced historic stock market highs and record low unemployment, which we saw right before the pandemic.

For everyone, and especially for Millennials, I think it’s fair to say change is the only constant in our lives.

Al: And it would appear that these economic factors are seriously affecting Millennials’ life choices. I mean compared with past generations, they’re buying homes, getting married…or not, and also starting families at much older ages. So Mihaela, I’d be interested to hear what you’ve seen among your peers in this regard?

Mihaela: I definitely see these generational differences. My mom was only 23 when I was born. Part of the reason for doing things later in life might be the economic downturns Catherine brought up. Another factor is the student debt that we carry and how much that eats into our budgets.

The average student loan debt among Millennials with loans is around $38,000. These experiences have absolutely shaped the way we view starting a family— many of us may want to have some financial security before we get married and have kids.

Al: I think that’s really spot on, Mihaela. Now, you mentioned not hurrying to get married or start families and I totally get that, but what about home ownership?

Mihaela: That is a tough one. The rise in home prices have outpaced both wages and general inflation. It’s hard to buy a house now. But it is also scary. Millennials witnessed all the foreclosures and upheavals to families’ lives following the real estate bubble bursting in 2008 and 2009. And the pandemic has made it really risky to make big financial decisions.

Al: Exactly. Now Catherine, turning back to you and speaking of the pandemic, I’m thinking back to your last report on generations in the workforce which was conducted late in 2020 when the pandemic was sadly and brutally in full swing with so many businesses shuttered.

So, what did you discover in terms of how the pandemic affected Millennials’ finances?

Catherine: We discovered a lot, and the first thing I want to reiterate is we did this survey of employed workers in late 2020, and as you mentioned, it was the height of the pandemic…or retrospectively, hopefully it would have been the height of the pandemic. These were employed Millennials. Many were unemployed at the time.

Even though they were employed, our survey found that more than half of Millennial workers (51 percent) had experienced one or more negative impacts to their employment as a result of the pandemic, ranging from layoffs and furloughs to reduced hours or reduced pay. So, they may have been employed but they didn’t come out of it unscathed.

Almost 6 in 10 Millennials (58 percent) said their finances were negatively impacted during the pandemic at that time. And seven in 10 had made one or more adjustments to their financial situation, such as reducing everyday expenses, dipping into savings, accumulating credit card debt, and some even moved back in with family or friends to help save money.

Al: Well, outside of tightening personal budgets by reducing expenses, the rest sounds pretty grim. What else did you find?

Catherine: We found a common misconception. We found something surprising about Millennials which also represents a common societal misconception. Three in 10 Millennial workers are serving as caregivers for an aging parent or loved one. And the misconception being societally, we often think of caregivers as being much older.

But the Millennial generation is finding the need and stepping up and taking on these caregiving responsibilities. And it’s really important to highlight what they’re doing is so incredibly valuable for their loved ones, but their own personal employment can take a toll.

In offering and supporting a loved one through caregiving, many Millennials are also making adjustments to their employment, ranging from using vacation days to missing days of work. Some have either quit or thought about quitting their jobs altogether.

Al: Well, you know, Catherine, that’s really impressive. Big props to the Millennials for stepping up because it’s tough enough when you’re trying to get your career started or advance it…and then step in to play the role of the caregiver. I would say they have really stepped up in a big way.

Now, based on their life experience and the immediacy of their financial situation amidst the pandemic, are Millennials even allowing themselves to think about their future retirement?

Catherine: Millennials are a truly remarkable generation. And to your point, with the immediacy of everything they’re going through, it is astonishing that so many Millennials are continuing to focus on the future.

More than eight in ten (82 percent) say they are currently saving for retirement, which is just extraordinary. I followed Millennials for years in our research, and of course, as you know I’m a retirement enthusiast myself. But the Millennial generation, I’ve come to think of as the retirement generation.

They started saving for retirement in their 20s – and those who were saving, the median age they started saving was 25, which is much younger than their older counterparts, Baby Boomers and Gen X. And one of my favorite factoids we’ve seen repeatedly in our research over the years is Millennials are more than twice as likely to frequently discuss saving and investing for retirement compared with older generations.

This year’s survey that we’re taking about, 31 percent of Millennials say they frequently talk about it, compared with just 13 percent of Baby Boomers, who are the generation that are nearing and entering retirement.

Al: I can certainly validate that. Full disclosure, I have two Millennials that are now out in the world and doing great things. And I have to tell you, I’m impressed by their foresight and taking those steps toward retirement and consulting with me and with their own financial advisors. I think that’s really encouraging.

We’ve covered a lot of real estate today. So, what would you consider to be important takeaways from what we’ve discussed and learned?

Catherine: Well, our first big takeaway, I think has to be about jobs and employment…the pandemic has been so disruptive. And for Millennials, if we touch on those who have maybe stepped out of the workforce during the pandemic, there is no better time to look for a job than right now. Employers are scrambling in their searches to find talent.

We are also reading all the headlines of what has now been commonly dubbed or referred to as The Great Resignation, meaning there is a lot of movement in the workforce right now as both workers and employers rethink their priorities. So, if you are thinking about making a change and looking for a job, one thing we talked about a couple episodes ago, employer benefits…it is so important to be on the lookout for employer benefits. They are part of your compensation package and can range from things like health insurance and other insurance coverages to an employer sponsored retirement plan such as a 401(k) that may very well bring a matching contribution.

Al: I couldn’t agree with you more. If you are going to be making that kind of move, you want to make sure you take all those factors into consideration. This is probably the best time to be able to do it. Any other points you want to address?

Catherine: Both from a life and financial perspective, I highly encourage Millennials to engage in financial planning and not just a mathematical exercise. To truly do it, envision your life, what’s really important. What goals do have for yourself? If it’s starting a family or buying a home or saving for retirement, just step back and reflect on those goals, then put a pen and paper to it. What is needed? How much do you need to save? Build a plan towards achieving those goals.

Of course, as the retirement enthusiast that I am, I think it’s also a terrific idea to use a retirement calculator or consult with your retirement plan provider to estimate how much you are going to need for retirement. We have been doing the retirement survey for years, and very few Millennials or people of all ages have actually taken that step to estimate how much they need to save for retirement.

It’s also a good idea, if you are saving for retirement, to check in on your savings and investments and make sure they are appropriately invested towards your risk tolerance and years to retirement. And if you feel like you need help, which many people feel they do, a great starting point is your employer’s retirement plan provider or consider using a professional financial advisor.

Al: Absolutely. Now, Mihaela, is there anything else you’d like to add before we wrap things up?

Mihaela: For those with student loans who stopped making payments amid the pandemic, be aware that you need to start making payments again. For most loans, this is at the end of January 2022.

Al: Very important point there. Well as always, Mihaela and Catherine…great conversation and thanks again.

Now, where can listeners go to learn more?

Catherine: A great starting point is our website at www.transamericainstitute.org and there you can find the survey report we’ve been talking about. It’s titled Living in the COVID-19 Pandemic: The Health, Finances, and Retirement Prospects of Four Generations, and it’s based on Transamerica Center for Retirement Studies’ 21st Annual Retirement Survey.

Mihaela: Also, our website, www.transamericainstitute.org, has information about the various types of employee benefits, which could be especially helpful for Millennial jobseekers. And we have a guide on the Health Insurance Marketplace 2022 Open Enrollment which runs from November 1, 2021 to January 15, 2022.

ClearPath: Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. You can find our weekly podcast on WYPR’s Podcast Central and mobile app, wherever you get your podcasts, and at transamericainstitute.org/podcasts.

Clearpath is produced by Transamerica Institute with assistance from WYPR.

Al Waller is a long-time Baltimore native and employment expert with a 30-year career in leading and advising locally and globally based corporations on matters including: Talent Acquisition and Retention, Employee Relations, Training and Development.
Catherine Collinson is the founding president and CEO of nonprofit Transamerica Institute and its Transamerica Center for Retirement Studies, and she is a champion for Americans who are at risk of not achieving a financially secure retirement. With two decades of retirement industry-related experience, Catherine is a nationally recognized voice on workforce, aging, and retirement trends. She was named a 2018 Influencer in Aging by PBS’ Next Avenue. In 2016, she was honored with a Hero Award from Women’s Institute for a Secure Retirement (WISER) for her tireless efforts in helping improve retirement security among women.
Mihaela Vincze is a public health expert and experienced health care educator. Serving as Transamerica Institute’s health care content developer, she shares insights on health and wellness on ClearPath—Your Roadmap to Health and WealthSM. Mihaela earned her master’s and bachelor’s degrees in public health at California State University, Northridge.