How Gloomy is the Retirement Outlook for Millennials?

Abstract

Social, economic, demographic, and public policy shifts have made Millennial retirement security a pressing concern. Many recent trends threaten financial security for future generations of retirees. Male labor force participation pre-age 55 has slumped, men’s median earnings have stagnated, marriage and homeownership rates are falling, debt levels remain high, and out-of-pocket spending on medical and long-term services and supports are rising. Other trends are more encouraging, such as women’s higher earnings, the rise in labor force participation at older ages, and improvements in educational attainment. We use a dynamic microsimulation model to project how various forces might play out over the next 30 years to shape the retirement security of US residents born in the 1980s. Our projections show that median age-70 income will be higher for Millennials than previous generations, but this cohort faces a higher risk of seeing falling living standards in retirement.

Keywords: retirement, labor force participation, living standards, financial security

JEL Classification: J2, I31, D14