The pandemic-induced recession is affecting workers of all ages across the U.S., but it will create specific challenges for younger Americans to achieve a secure retirement.
Before the current economic crisis began, Millennials already faced several obstacles in preparing for a secure retirement. According to CNBC, 45 percent of Millennials in 2019 had “less than $25,000 in personal savings,” which is less than comparable savings levels for Generation X and Baby Boomers.
Millennials held less wealth before the pandemic for a number of factors, such as high student loan debt, that they work for lower wages than previous generations, and because they are facing the second recession of their working lives following the Great Recession in 2008.
Now, Millennials will have to grapple with an economic downturn that is disproportionately affecting them. According to the Center for Retirement Research at Boston College, “more than 5.5 million Millennials have become unemployed this year” because “young adults were overrepresented in the food service, hospitality, and leisure industries slammed by state shutdowns to control the pandemic.”
As the labor market faces an uncertain future (with states in varying stages of reopening and then closing their economies depending on whether coronavirus cases are decreasing), it will be difficult for Millennials to prepare for retirement if they remain out of work or return to working intermittently.
And even though Millennials may be younger members of the workforce, earning low wages at the beginning of their careers impacts them for the rest of their working lives, as the power of compound interest disappears if someone’s wages are too low to continually save money.
Most Millennials who serve as public employees, however, still have access to a defined benefit pension, which offers a better pathway to retirement security compared to defined contribution plans like 401(k)s. Policymakers must protect pensions during this economic crisis to ensure Millennial public employees can retire with dignity.