# Millennials: Finances, Investing, and Retirement

Millennials are the generation that came of age near the dawn of the 21st century—the new millennium. As the first to be born into a digital world, members of this group are considered [digital natives](https://www.investopedia.com/terms/d/digital-native.asp). Technology has always been a part of their everyday lives—it’s been estimated that they check their phones as many as 150 times daily—and serving them has been a major contributing factor to the growth of Silicon Valley and other technology hubs. 

The Pew Research Center defines millennials as those born from 1981 to 1996, although researchers include those born as early as 1980 or as late as 2004. Also known as Generation Y (Gen Y), the millennial generation follows Generation X (Gen X) and is followed by Generation Z (Gen Z). In terms of numbers, it has edged out the baby boomers as the most significant generation in American history.

Research has shown the millennial generation to be the most ethnically and racially diverse in U.S. history. Gen Y tends to be progressive in their political views and voting habits and less religiously observant than their predecessors, [Gen X](https://www.investopedia.com/generation-x-all-eyes-on-retirement-5224396).

### Key Takeaways

*   Millennial is the name given to the generation born from 1981 through 1996, also known as Generation Y (Gen Y).
*   It is the biggest generation in American history in terms of numbers.
*   The increasing wealth gap has meant that millennials start off with less household income.
*   Millennials also face other financial obstacles like a record amount of student loan debt.
*   Millennials often see their career trajectories and retirement differently from the way that their parents and grandparents did in the past.
*   Millennials tend to want to follow their ambitions while they’re young and not have to wait to travel, create their own nonprofit, or pursue hobbies.

  

## Millennial Economic Picture

Millennials face the most uncertain economic future of any generation in America since the [Great Depression](https://www.investopedia.com/terms/g/great_depression.asp). Three decades of stagnant wages were followed by the [Great Recession](https://www.investopedia.com/terms/g/great-recession.asp) (which left more than 15% of those in their early 20s out of work). They then came the coronavirus pandemic, which upended the financial and housing markets plus impacted employment across multiple sectors.

The job market has improved since the recession and rebounded since the pandemic. Still, millennials and everyone else face wage stagnation, thanks in part to a 20-year trend of decreasing labor market mobility. Labor market mobility started to stagnate in 2000, just as the oldest millennials entered the job market. When workers don’t move around, from both job to job and region to region, employers have more power when negotiating wages—a phenomenon called monopsony—which translates into employees getting paid less.

Unfortunately for young people whose careers coincided with this trend, it’s difficult to make up lost [earnings](https://www.investopedia.com/terms/e/earnings.asp) from early, slow years. Add to this financial reality the record amount of debt (mainly from student loans) that this generation is carrying, and there is one reason for financial stress.

However, [millennials have been working hard](https://www.investopedia.com/millennials-are-financially-confident-but-stressed-5224413) as they entered their thirties. According to a 2021 quarterly report, Millennials live in the present. They focus on their immediate financial well-being by maintaining a budget setting up emergency funds. As a whole, they lead by the most significant margins on long-range financial goals.

### Work and Income

The increasing wealth gap has meant that millennials start with less [household income](https://www.investopedia.com/terms/h/household_income.asp). So, their most popular personal finance priority is to have enough money for day-to-day living expenses. During the recession, some millennials postponed getting higher education or additional degrees due to a sluggish job market.

As the job market improved, many millennials chose the gig economy. When the pandemic hit and social distancing regulations were implemented, many millennials found their jobs went remote. And many millennials "flourished," and 74% of millennials didn't plan to return to the workplace five days a week, according to a 2020 Gallup poll.

Of course, some millennials struggle to land full-time positions and are making do with part-time positions, but overall, this group is earning more than other generations. According to the U. S. Bureau of Labor Statistics, the median income for someone aged 25 to 34—which roughly approximates the millennial generation—was $82,000 in 2022.

### Becoming Financially Independent

As many younger millennials and Generation Z, their younger siblings, do, living paycheck to paycheck doesn’t make financial independence easy. Gaining independence should be income-driven rather than frugality-fueled. While spending frivolously is never advisable, cutting back on your Starbucks intake isn’t going to make your fortune. Accumulating wealth requires broader, long-term thinking.

For instance, if you’re making $30,000 a year, it will be nearly impossible to amass a large sum of money—even if you were to save all of your extra pennies. For instance, broadening your earning capacity—via education or work experience—can help increase your worth and broaden your income horizons. 

### Getting Out of Debt

Paying off [student loan debt](https://www.investopedia.com/terms/s/student-debt.asp) has become increasingly difficult, even for those with a job. While it’s natural to prioritize paying off debt as soon as possible, that may not be the best course. You need to have your money working for you, too.

One approach is to leverage what funds you have: Extend your college loan repayment period to lower your monthly payments and use the extra cash to start building a retirement nest egg. In your 20s, you’re at the [time when compound interest is most in your favor](https://www.investopedia.com/financial-edge/0212/5-advantages-to-investing-in-your-20s.aspx) because you have decades for even small amounts of money to grow. It’s also a good time to take risks because if an investment does tank, then your portfolio has time to recover from losses. 

Also, being in debt is not all bad. Particular sorts of installment debt—like student or auto loans—can be helpful. As long as you pay them in a timely and regular fashion, they help you establish a good credit history. You need a good history and credit score to obtain everything from a residential lease to a bank loan (and the most favorable interest rate possible for it). Not only is it OK to have the right kind of debt, but it can also make a lot of financial sense. Take a basic [capital investment](https://www.investopedia.com/terms/c/capital-investment.asp), such as a car. You could obtain a low-interest auto loan and pay it off in small, regular installments while more of your cash remains available to put toward something else.

Paying your monthly credit card bills on time is crucial to building your credit rating. Try to pay your bill in full at the end of each month to avoid racking up interest charges that can quickly snowball. Also, having several cards (but not owing anything close to your credit limit—charge no more than 35% of your limit on each card) will help your credit utilization ratio. This percentage is another important factor when being evaluated for a car loan or a mortgage.

> **Important**
>
> The net worth gulf between the rich and the middle class has been at its highest level since 1941, as well.

### Saving for a Big Purchase

Saving for big-ticket items, like a home of one's own, is another goal. Unfortunately, [lenders](https://www.investopedia.com/terms/l/lender.asp) are imposing stricter guidelines for significant types of financing, especially mortgages. Therefore, millennials may need to make a substantial down payment [if they want to purchase a home](https://www.investopedia.com/save-for-a-home-or-retirement-8599275). Most savings accounts do not provide a high yield on returns, which means you could lose money over time if the interest rates don't pace with inflation.

Savings accounts [cause you to lose money over time](https://www.investopedia.com/idle-savings-can-erode-wealth-11719310) because their low interest rates do not keep pace with inflation. They're also subject to maintenance fees that can nibble away at your balance. It's not terrible to keep a small emergency fund in the bank—after all, it's still Federal Deposit Insurance Corp. (FDIC)-insured—but the bulk of savings should be elsewhere.

### The Millennial Life View

Millennials often see their career trajectories and retirement differently from their parents and grandparents saw theirs. Frequently dubbed the “instant gratification generation,” they don’t want to work first for a big company and later try to do their own thing and enjoy life. They want to pursue ambitions now, whether going for a dream job right out of college, working for someone else’s promising startup, or creating a location-independent business. They want a job that allows an outstanding work/life balance while they’re young, so they don’t have to wait to travel, create their own [nonprofit](https://www.investopedia.com/terms/n/non-profitorganization.asp), or pursue hobbies. They may even be planning not to retire because they love their work.

> **Tip**
>
> Another smart financial move is buying long-term disability insurance while you’re young and healthy, which qualifies you for better premiums.

### Entrepreneur for Life

Many millennials see themselves working forever, but not because they expect to be forced into that situation by a bad economy or poor financial planning. They envision a lifelong career because of their passion for what they do.

"I have taken a very different approach than my parents," said Michael Solari, [Certified Financial Planner](https://www.investopedia.com/terms/c/cfp.asp) and principal with [Solari Financial Planning](https://solarifinancial.com/), a New Hampshire-based, fee-only financial planning firm with offices in Bedford and Nashua, NH. "Initially, when I got out of college, I took the normal path working for a large company, but after I got laid off in 2009, I decided to take my career into my own hands. I love financial planning, so I started working toward creating my own firm." Solari's company caters to young professionals. "I'm so happy with my decision, and I plan to work until I can't physically," he said.

The firm provides Solari the ability to create his schedule to give him a work/life balance, which is most important because he observed his parents being strapped to their companies. "Retirement is for people who are unhappy with their careers," he adds.

Even if you're planning to work throughout your life, you still need to save for retirement; you also need a safety net in case you can't work forever because of illness or disability—or because you're pushed out of your job and can't find another. And if you change your mind one day, you'll appreciate having the flexibility that retirement savings will give you. Investing in the stock market, using ladder CDs, or opening a high-yield money market account, are all ways to grow your money. Investing $100 per month in the stock market for the next 30 years would give you approximately $122,000, assuming a 7% return.  

## Millennials and Retirement

You would think [retirement planning](https://www.investopedia.com/terms/r/retirement-planning.asp) would be a no-brainer for this young group, which has watched parents and grandparents struggle so much with recessions, saving money, and real estate booms and busts. They should know that Social Security and company pension plans are [no longer reliable retirement income options](https://www.investopedia.com/will-millennials-get-social-security-8578850)—especially the latter, as private-sector employers eschew defined-benefit plans in favor of defined-contribution plans such as 401(k) plans, which shift much, if not all, of the savings burden onto the employee.

Still, this is not the case for all millennials and their families. Some of them used retirement accounts when they lost their jobs during the pandemic, which impacted employment and housing for millions of Americans.  

### Can Millennials Retire?

Millennials are [planning for their future](https://www.investopedia.com/articles/financial-advisors/122815/how-much-millennials-should-save-retire-comfortably.asp), but not enough of them. Approximately 21% of millennials do not have a job that provides an employer-sponsored retirement plan, according to a 2021 Transamerica study.

Another cause for concern: A full 70% of the folks surveyed believed that once they’re retirees, they’ll be able to survive on $36,000 a year. According to the U.S. Bureau of Labor Statistics, the problem with this perception is that in 2022, the average yearly expenses for those ages 65 to 74 were $60,844 a year.

If you even saved up enough to live on $36,000 a year from a retirement account, it will likely not be enough. “With the cost of goods, food, and housing at such inflated prices now, millennials will not be able to live off of $36,000 a year in retirement,” said Carlos Dias Jr., founder and managing partner of [Dias Wealth LLC](https://diaswealth.com/) in Lake Mary, FL. ”Based on an inflation rate of 3%, the value of $36,000 today will be reduced to $14,831.52 in 30 years.” The disparity in perceived retirement funding needs could easily lead to financial pain for retirement-age millennials.

Millennials who invest in the stock market may see a rosier retirement picture. Over the long haul, the stock market has produced [return rates](https://www.investopedia.com/terms/r/rateofreturn.asp) hovering in the 10% range, and those who start investing while young benefit from those extra years.

### Partial Retirement Now

Living a partially retired lifestyle is the most moderate approach. You will probably need a part-time job with a decent salary that allows you to work less and continue saving for the future. You might achieve this goal through [freelancing](https://www.investopedia.com/articles/personal-finance/082315/millennials-guide-be-freelancer-vs-employee.asp) on your schedule or by running or working for a location-independent business that lets you combine work and travel or hobbies.

Your long-term saving and investment strategy should be based on whether you want. Do you aspire to a partial retirement plus working forever as a freelancer, or partial retirement now plus a conventional retirement down the road? These are questions to ask yourself before leaving a full-time job.

> **Important**
>
> Those considering any form of early retirement need to perform a considerable amount of research and consider numerous variables to ensure its financial feasibility. In addition to extensively planning ahead to live frugally, it’s crucial to still have enough money set aside in the form of an emergency fund. Individuals who don’t account for unexpected expenses in their budgets may find their retirement plans derailed by a single car accident or injury.

## How Millennials Invest

While millennials can sometimes be wary about investing, the availability of social media tools is making it easier and more comfortable for this age group to learn. To ensure that they do not experience the same problems as previous generations, millennials are approaching investing in [an entirely different manner](https://www.investopedia.com/articles/basics/12/challenges-investing-modern-world.asp) from their parents and grandparents.

Given their love for anything tech-related, it should come as little surprise that millennials are taking advantage of a variety of high-tech and social media tools that allow them to plow their wealth into the investment vehicles of their choice. They are now leveraging social networking platforms, websites, and mobile apps to do everything from [following stock-picking tips](https://www.investopedia.com/social-media-influences-one-third-of-new-investors-many-regret-their-financial-choices-11793772) to finding financial planners. All it takes is clicks on an app for millennials to review a prospectus, get advice, and even commit funds—and they reward companies that let them do so. Factors such as [social responsibility](https://www.investopedia.com/terms/s/socialresponsibility.asp) and environmental responsibility also frequently play a crucial role in millennials' money.

Millennials are also more likely to take advantage of online tools for monitoring their investments. With such tools, investors can review their portfolios anytime they desire rather than waiting for [quarterly reports](https://www.investopedia.com/terms/e/earningsreport.asp) to arrive in the mail—and this group takes full advantage. Sixty-one percent of millennials approved of robo-advisors for investing their money.

### New Breed of Investing Tools

Millennials are comfortable with digital banking and robo-advisors, as they came of age during the technology boom. Millennials use a variety of apps, including.

*   [Wealthfront](https://www.investopedia.com/wealthfront-review-4587933): A wealth management system, Wealthfront emphasizes asset allocation features with low fees.
*   FutureAdvisor: This online investment advisor offers the capability of managing investments automatically for a low fee.
*   SigFig: This free personal finance service provides users with automated investment advice.
*   LearnVest: New investors who may need assistance in creating a personalized [financial plan](https://www.investopedia.com/terms/f/financial_plan.asp) can utilize this platform to get matched with their own personal planners.  
    
*   Acorns: This investment app specifically targets millennials who might not have a lot of additional cash to invest. Acorns track debit and credit card purchases and round up those purchases to the nearest dollar, then takes the difference and puts it aside for investing. After reaching a total of $5, Acorns invests the money in investment portfolios selected by the user.

## What Age Range Is Millennial?

According to the Pew Research Center, “millennial” applies to anyone born from 1981 through 1996.

## Where Did the Name Millennial Come From?

Millennials are so named due to them being the first generation to come of age in the new millennium, according to the Pew Research Institute. The term Generation Y (Gen Y) is also used in reference to this generation, due to them following Generation X (Gen X).

## How Much Money Do Millennials Make?

According to 2020 data from the U.S. Census Bureau, millennials earn a pretax income of $71,566 in their households.

## The Bottom Line

At the end of the day, many millennials are [planning for retirement](https://www.investopedia.com/target-date-funds-millennials-8553556), even if it looks a little different than their parents' or grandparents' post-work lives. For some, working extra hard by building passive income streams, like investing in real estate, may help cushion the potential for early or partial retirement. Other millennials who [don't anticipate a robust financial exit](https://www.investopedia.com/gen-x-fears-running-out-of-money-more-than-death-11723770) from their jobs may incorporate travel and enjoyable activities throughout their working life.

Millennials who weathered the recession or watched their parents' struggle may have values that force them to be mindful of how they spend, focusing on [discretionary income](https://www.investopedia.com/terms/d/discretionaryincome.asp), taking at least [one vacation each year](https://www.investopedia.com/micro-retirement-or-vacation-why-gen-z-and-millennials-are-redefining-time-off-and-how-to-afford-it-11789023), and pursuing different activities and experiences as often as they can. Overall, as a generation, data shows most millennials are presently [saving for retirement](https://www.investopedia.com/articles/financial-advisors/122815/how-much-millennials-should-save-retire-comfortably.asp) and remaining hopeful about their financial futures.

> **Article Sources**
>
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