Overcoming The Unique Retirement Challenges Facing Millennials by Larry Klein
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Your clients have likely referred their Millennial children or grandchildren to you for help with financial planning. It’s a tall order because of the unique financial challenges they face. Here’s some practical advice to overcome those hurdles.
Although they don’t have significant financial resources, they are worth courting by Gen X and Millennial financial advisors. Why? They outnumber Baby Boomers by 92 million to 78 million.
Their first problem is student and educational debt. For the first time in America, there is now more student loan debt than credit card debt.
Unlike earlier generations that had manageable student debt (I paid off mine within five years after graduation), this generation has relatively larger amounts. In fact, a recent Wells Fargo study of those 22-35 years old found that 75% of Millennials with student debt found it unmanageable.
The St. Louis Federal Reserve reported that the “current national rate of serious delinquencies for student loans – defined as 90 days or more overdue – is about 11 percent, nearly double where it was in 2003. That number also could be considerably higher considering that many student loans are in deferment, grace periods or forbearance.”
Making significant student debt payments leaves less money that you can “financially plan.”
For example, if we get down the simple requirement to pay rent, here’s the gap that Millennials face relative to their income:
When paying rent is a struggle, it’s hard to allocate funds for anything else much less investing for retirement. As an aside, this is also a case for funding 529 plans or similar investment vehicles early on for the next generation.
In fact, it’s not just rent that makes routine finances difficult to manage. As few Americans may realize, the Millennials entered their adulthood as incomes started to decline. While many believe the “Great Recession” is the cause for Millennials’ financial difficulties, that is mistaken. American household income had already peaked and started declining in 2000 (I added the straight red lines below to make the trend obvious).
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