I’m constantly telling my kids how I moved out at 19, worked my own way through college and saved up for and bought a house. I am very proud of this and hoped to set an example for them to follow. The really bad news for my kids and others in their 20s is that it’s getting a lot harder to live the American dream.
Student Debt is Stifling
Anyone who is attending college or has recently graduated is painfully aware of the absurd cost. Even local state college tuition is unaffordable to middle class students, without taking out some pretty hefty loans.
The total amount of student loans now exceeds $1.1 trillion and 66% of students with a 4-year degree now graduate with some student loans. The average amount per student is now over $30,000. Student debt has almost quadrupled in the past decade and this falls heaviest on minority and low-income students.
Wages are Stagnant
Wages have been essentially flat for the lowest 70% of workers for the past decade and have declined for the lowest 20%. Wages are way up for CEOs and the other top 5% of wage earners. Productivity is way up and corporations are making record profits. But, they are taking care of their shareholders, instead of their employees. This trend will continue, so employees need to look for high paying fields and entrepreneurial types may consider starting a business.
Source: Business Insider
Housing Prices are Up
Housing prices across the U.S. rose an average of 10.9% in 2013 and are headed higher this year. In many parts of the country buying a house is nearly impossible for couples in their 20s. Combined with student loan debt and stagnant wages, most couples will be lucky to be able to afford a house in their 30s. Buying a house has always been the next obvious step for young couples. But, many are starting to consider it an expensive hassle. That’s a shame, because living in a paid off house makes retirement considerably more comfortable.
Median Savings is Zero
The typical American isn’t saving anything for the future right now, despite having plenty of income left over after paying their bills. People are simply choosing to spend all of their discretionary income, instead of saving some. This is a sad reality, where people are choosing to live paycheck-to-paycheck, instead of saving to get ahead. Saving in your 20s is one of the keys to a prosperous future. Waiting until your 30s makes it much more difficult to build a nest egg.
Source: Fox Business
Retirement is Expensive
Anyone who is 20 years old right now could need to save $7 million in order to retire and this would only allow an annual withdrawal of $43,600 in today’s dollars. That is a mind-boggling amount of money to save, for retirement with a median income. My original retirement goal in the 90s was to save a million dollars, but I have since decided to at least double that amount. People in their 20s need to save a lot more and may not get to retire until well into their 70s.
Source: Yahoo Finance
The Bottom Line
The bottom line is that it’s getting much harder to earn a living wage and prosper in the working class. Those without a plan may join the growing millions of working poor. In order to succeed, you need work towards a higher income, manage finances wisely, save for the future and invest to outpace inflation.
“Success is liking yourself, liking what you do and liking how you do it.”
- Maya Angelou