The NCSL Blog


By Khadija Murad and Anna Petrini

In 2016, millennials became the largest generation in the U.S. labor force according to the Pew Research Center, surpassing both the Gen Xers and baby boomers for the first time.

Credit: Market WatchBut as the global pandemic continues to dim their economic prospects, multiple reports are examining just how well prepared this generation will be when it finally bows out of the labor force and retires.

Millennials’ careers got off to a rocky start as many of them entered the workforce during the Great Recession. Economists have noted that while millennial employment recovered from that crisis within a decade, millennial earnings never did.

According to a Brookings Institution study, increased student debts that threaten to overwhelm their finances and the transformation of the traditional workforce to a gig economy with fewer workplace retirement and health benefits have also contributed to millennials having a lower net worth than previous generations. For example, one analysis of fourth-quarter Federal Reserve System data from 2019 found that the millennial generation holds approximately zero net real estate wealth.

The current downturn is pounding an already hard-hit generation even harder. The Federal Reserve Bank of St. Louis estimates that 4.8 million millennials have lost work since COVID-19 triggered a recession (that represents more losses than the two previous generations sustained). Blacks, Hispanics, those without four-year college degrees and women have been more likely to find themselves struggling financially than their counterparts.

New federal rules have made it easier for retirement savers to tap retirement accounts to cover emergency costs. Millennials have been more likely than older generations to dip into their retirement savings in the current economic climate, according to a survey from the Transamerica Institute. (A worker who withdraws $10,000 at age 35 could miss out on approximately $43,000 in retirement savings by age 65.)

Unlike their parents’ generation, many millennials expect their primary source of retirement income to be self-funded through retirement accounts (e.g., 401(k)s, 403(b)s, IRAs), or other savings and investments, according to the Transamerica research. Most are concerned that Social Security will not be there for them when they are ready to retire.

Still, there are glimmers of hope as COVID-19 offers an opportunity to reassess what each generation needs to build resilience and achieve financial stability.

Contrary to some reports that malign millennials as preferring instant gratification and fleeting experiences to rigorous long-term saving, a pre-pandemic report from Bank of America found that nearly 73% of millennials are saving for different life milestones and that millennials, on average, began saving for retirement at the age 24, which is much earlier than previous generations.

While Gen Xers have a higher net worth than millennials, some data shows that millennials are saving more aggressively for retirement than Generation X did at the same ages. Despite their generational gap, a 2019 Wells Fargo survey on retirement found the same share of millennials and Gen Xers have between $25,000 and $100,000 saved in personal retirement accounts. Other researchers are less sanguine.

States have begun addressing this issue in numerous ways, including exploring portable benefit options, enhancing financial literacy, and adopting state-facilitated retirement savings programs. Creative policymakers may be able to help spare Gen Z, which is just entering the labor force, some of the desperation, lower wealth, and delayed milestones that have beset the millennials.

Khadija Murad is a former intern with NCSL’s Labor, Employment and Retirement Program.

Anna Petrini is a senior policy specialist in NCSL’s Labor, Employment and Retirement Program.

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About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.