Why Are 20-Somethings Retiring?
bloomberg.com
bloomberg.com
Also, it isn't just 20-somethings. US employment has been somewhat of a raw deal in the last 15 years for all age groups. Some people have realized that working to live just isn't worth it.
There's a lot of bullshit work assigned in a typical corporate job, and this 'impedance mismatch' forces some people with financial strength to quit and do what they really want to do in life even if that means living on a much lower annual income.
In personal finance it's called, "Financial Independence." Which basically means you aren't necessarily done working for the rest of your life, just that working has become completely optional.
Optional - as long as you live in your parents' basement and don't want to start a family. :-)
I think this is where there's a fundamental disconnect in cultures.
I'm 33, my wife 31. We're about to have kids, and we've strongly considered moving in with my parents, not only to spend more time with them, but also to provide care when necessary as well as have their help watching and raising our children.
Just because we're well off (we're financially independent) doesn't mean we need an expensive mortgage in the suburbs to raise our family, nor does it mean we can't live with family or have them live with us.
America is far more broken than I expected.
Otherwise, prepare to move to the basement.
It's just a cultural thing: many Americans prize their independence and privacy, so grown kids want to get away from their parents.
And vice versa, by the way! My parents definitely would not want me to move my family to their house--they love us and enjoy visits, but are enjoying their own independent lives too.
It turns out that you can safely withdraw 3% a year indefinitely (from a portfolio composed of a mix of stocks and bonds in low-fee index funds) without reducing the the value of the investments in the long run. A higher rate of 4% will decline on average over time but can be enough to survive multi-decade retirements, so that's often a more realistic target. There are tools (e.g. http://www.firecalc.com/, http://www.cfiresim.com/) to run simulations based on historical market data.
At 4% you need a portfolio equal to 25 years worth of expenses. Let's say you spend $60k a year in today's dollars. This works out to a monthly budget of $5k. If you can save $1.5M then that will pay your expenses for 30 years, without any other income, with a 94% chance of success. At 3% you need 33 years of expenses, or $2.0M, and that has a 100% chance of success. This is all based on past data of course (past performance does not imply future performance and all that).
These are large sums of money, but it's possible for most professional workers, and especially couples, to accumulate them if they are fairly frugal and make a decent income. The time required entirely depends on what portion of your income you can save (see http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...). Assuming a constant income, as well as constant expenses while working and after, if you save 50% of your household income it will take 17 years to reach the 4% level. So start at age 30 and you'll be done by 47.
Is this essentially about people moving back in with family?
State welfare programs, section 8, food stamps, "earned income credit", medicaid, SSI, TANF, SNAP, etc. There's lots of aid in the US. Over 100m people nationally are on some level of means tested welfare. That's pushing one third of this nation. National spending accounts for $1T in welfare spending. That's slightly less than Mexico's entire GDP; a country of 122m.
http://object.cato.org/sites/cato.org/files/pubs/pdf/PA694.p...
The narrative of the US not having any welfare is asinine. In fact, the spending is staggering. When I lived in poorer neighborhoods in Chicago, most of my neighbors were on a fair amount of welfare to the point where they never had to bother getting a job. If you're willing to live in an urban area and live a modest lifestyle its largely trivial to game welfare benefits for a living.
>State welfare programs, section 8, food stamps, "earned income credit", medicaid, SSI, TANF, SNAP, etc. There's lots of aid in the US.
I question this response with the qualifier of "living off reasonably."
I'm certainly lucky enough not to need any of that, but from what I understand, it's barely subsistence existence.
For me, when I was growing up on food stamps and welfare as a refugee, I know that it wasn't a level of living my family wanted to settle at. Evidently, neither does most of the country. The assistance helped us get settled and avoid a situation that surely would have resulted in us being thrown to the streets.
For one, they could actually be looking at jobs but passively. i.e. if you check the newspaper or websites for jobs, but didn't apply to any, you're not counted as 'looking for a job', so you're not unemployed either even though you obviously are. Passive job search is not included in the figures.
Other than that, note that unemployment is measured in periods of 4 weeks. i.e. if you have a consulting gig for 8 months, and are then out of a freelance job for 5 weeks (after which you get another gig), and get interviewed during that time, you'd be unemployed, despite the fact you may have earned a normal annual income that year.
Anyway, that's just to say that unemployment numbers may be off. It doesn't answer your question yet.
But indeed there are also people who can't provide for themselves and are considered unemployed. A lot of them live at their parents, another significant chunk is simply living on debt. Creditcard debt is huge in the US.
Previous generations had two reasons to move out and rent on their own - marriage and health insurance. Nowadays Americans are marrying at much lower rate, and parents can keep kids on their insurance until the age 26.
So maybe this is the new normal, and the previous status quo of 20-something moving out and getting a job immediately was a distortion.
One of the side effects of moving to a fluid labor market is that you can basically get a job whenever you want. Moreover, you're forced to, and you're forced to stay up-to-date with market conditions so you can get a new job at any time. If you have to make this bargain anyway, who's to say that those jobs need to be contiguous? Why not take a job paying $90K for two years, live as if you had a job paying $60K, and then take a year off to travel?
My wife and I both did variants of this (her: bond trader => Peace Corps, me: financial software => startup => Google => startup), but we took our downtime in socially sanctioned, labeled ways and so don't fit into the "retired" statistics. But what about, say, the friend of mine who interned on a salmon fishing boat, took a job in economic consulting, did a multi-year sex tour of Southeast Asia, and now runs a hedge fund there? Or the friend of mine who runs a profitable SaaS remotely and is now doing Hacker Paradise, traveling the world? Where do they fit into the employment statistics? "Retired" is a lot better descriptor than "disabled" or "staying at home".
The numbers in the BLS report were on the order of 1-2%; I could easily believe that 1-2% of 20-24 year olds are doing gap years, or have software businesses that generate passive income, or have worked for a year or two at a lucrative profession and now saved up enough to travel the world.
Thew title of this post is a little misleading and the wrong question to ask.
Given that a lot of job growth in the economic "recovery" (especially for younger people) has been in the minimum wage range, I don't blame them. If you can't even pay the most basic bills from a minimum-wage job to live independently, why bother?
yeah its called being young and being inexperienced. Gotta put the time in before you're qualified to enjoy the meat..
If your labour has market value and you're taking crap from your employer, shop around for a new job. The other way of saying that we don't have lifetime employment anymore is that we don't have to suffer through lifetime employment anymore.
You don't have to tolerate stultifying bureaucracy. You don't have to suffer nitwit bosses. You don't have to deal with impossible coworkers. With an open labour market, you can work where you like.
A couple of days ago someone posted patio11's blog article on his experience working in Japan as a salaryman. The other side of the security of lifetime employment over there is that you have to tolerate horrible working conditions at your lifetime employer, and the labour market is so rigid that if you ever leave your employer, no one else will ever hire you.
Nowadays, in far too many companies all you get for hard work is getting downsized. I can't blame people for not wanting to put up with that, and there's not nearly enough reasonable companies around.
I'm 40 now and I certainly didn't get a company to "care for" me; that promise went away generations ago. The last time anyone was hiring on those terms was maybe the 70's. Three generations have gone by since anyone pretended that lifetime employment is actually still a thing.
When I started working I worked jobs I didn't want to do for the rest of my life, but it wasn't just about the money. I leaned skills, learned to work and learned I better find a new, better job - even if it is only slightly better. Some jobs only leave you with one important thing - a work ethic, and that is what gets you a better job, someday. I know, I'm just one person, but that is my story and I'm sticking to it. Maybe it will only get one person off their butt and doing something they don't enjoy.
You can't fix globalization and automation with personal work ethics.
What jobs don't have that? As if startups magically solved this problem by giving employees nothing but innovative thought provoking problems and everything else is handled by worker elfs. No, every place has its share of bs work. the difference is that a portion (majority?) of corporate folks stopped caring to actually solve problems. Instead they do the minimum to keep their jobs. You can do the same thing every day, waste 30% of time chatting with coworkers, another 30% on the net, and then complain about how boring your job is. I've yet to see corporations that didn't have good problems to solve.
I hate the idea that once you leave college and get a job your life of having fun is over. As though fiscal irresponsibility is necessary for finding your life's "meaning" and you can only do that in the four years you spend at college. I really have to question someone that found their life's meaning at a point in their life where they couldn't bother to be financially responsible for themselves.
It's not necessary, it's just that the market forces have made it such that fiscal responsibility is tightly bound to spending most your productive time, energy and drive at working. People barely have time to for family next to work. Think the market allocates people time for existential searching? That doesn't make someone else money; so, no, it doesn't.
The point is to start living intentionally. If you know what you value and want in life, it's easier to set goals and meet them--whether it's your education, your job, where you live, your finances, what experiences you have, etc.
People who don't start thinking about this when they're young might find later on in life that they've drifted into a situation that's hard to get out of. Like it or not, a lot of barriers are lower when you're 20--physical, cultural, financial. Once you're a lot older, there is no way to go back.
There's probably more than 300, 20 year olds who are living off private incomes.
It's actually pretty easy to become financially independent before you hit 30 if you finish college on time (while you're 23) and get a 6-figure job out of college, and work for a few years with a small (sub-25k/yr) annual cost of living.
1. The number of fields allowing a new grad to get a six-figure job are very small.
2. The number of places offering the above while also allowing the new grad to live in an area where they can have a sub-$2k/mo footprint are incredibly limited.
3. Of the people who are actually able to take advantage of the above, the majority of them will have no interest in doing so. For every highly-compensated employee at Google living in a van in the parking lot there are several in houses they can't afford with credit card and student loan debt to boot.
4. Gaining financial independence for the sake of gaining financial independence is sort of a pointless goal.
My guess is if you collected every person in the US who retired by the age of 30 and removed those who inherited money, won the lottery, and started a business, you could fit them in in a single large room.
Re 4. it's only pointless if you foresee nothing afterwards. To me there's nothing wrong with wanting to have "fuck you" money (not just being "independent") without really knowing what you'll do when you get it, you can figure that out later and you'll have many options available to you -- a lot of us just keep working, with the added benefit of being able to drop unsatisfying jobs without any anxiety of not being able to find a new one.
Not sure that you understand that financial independence can be just as simple as a function of your total invested assets and expected future annual costs given the reasonable assumption that in the long run your investments will net you at least an average 5% return per year. Is that assumption guaranteed to hold? No, but it's reasonable, and that's what buffer room is for. My rent is $1300/mo, with utilities it's usually around $1500/mo, for a 3-floor house I share with a friend. With miscellaneous other expenses like food and entertainment I end up with living expenses in the neighborhood of $25k/yr, rent is my primary expense since I have no debt. When my investment assets reach $600k, 5% growth nets me $30k/yr (I'm ignoring taxes). So long as my average annual expenses does not exceed $25k/yr, and my average return stays at or above 5%, this is sustainable indefinitely.
And this isn't the only path to financial independence, it's just really straightforward for higher-than-average earners not burning an insane amount of their income on rent. (Mortgages are a different story.)
Or maybe you want to live in a nice high end 1br condo in the heart of the city within walking distance to work and enjoy a higher standard of living because you can easily afford the $50k and still have plenty of money left over for living expenses and savings/investments?
Or to quote your earlier sentence, shouldn't it be "up to you how much you want to save vs. how comfortable you want to live"?
News flash, not everyone is in software. If you are I still doubt you are actually independently wealthy. Again, unless you were born that way.
Sorry for not doing a mathematical proof for those of you that think having $50k in the bank by the time you are 30 is independently wealthy when you haven't even put a down payment on a house in SF yet.
I lived through my first two years of college with roommates, savings, part-time/off-book bartending/bouncing and changing my long distance service.
Now he's a 30-something stay at home dad. He does a few remote consulting gigs, more to stay in touch than for the money.
"We're going to be running out of labor as we go through time,'' Blinder said on Bloomberg Television Dec. 31.
Oh, my. I hadn't even thought of that. I guess we'll need to expand the availability of slave-labour employer-controlled visas and guest worker programs, won't we? Let's forward this to our lobbyist.
I think people of all ages and social classes are in a bad mood these days.
I saw some rich guy on CNBC this morning and he was pissed because we don't appreciate everything rich people do for us and it is not hard to find pissed off poor people. Lots of old people like Trump because they are pissed off about this or that.
People are pissed off about health care, obamacare, etc. It is so ungrateful when you consider that 200 years ago people had no idea why infectious diseases made you sick, there were no painkillers, no psych meds, no blood pressure meds, no insulin or thyroid hormone. No antibiotics, antivirals, no heart surgery, warfarin, etc. For almost all of human history faith healing was the first line treatment for everything and now people are pissed.
People get pissed off driving and don't think it is a miracle that we have cars, roads, gas, mechanics, etc.
Anyway you've got to get over this idea that any generation is special; often it is much more like 10% of the boomers did it, and 30% of X, and 50% of Y and 70% of the Millenials do it -- most generational change is a "diffusion of innovation" situation.
If you want to understand the post 2000 period you have to understand the 1960s and 1970s and a good book from that era is
http://www.amazon.com/uncommitted-alienated-youth-American-s...
and it explains a lot of things like the hippie phenomenon and then the cult boom, school shooters and why people who don't have it bad join ISIS, all that. It is also the first academic book to use the word "postmodern".
He says "Our age inspires scant enthusiasm." and that is it. People don't really believe anything they are told and just go through the motions. For instance, look at defined contribution pensions. There has been Republican FUD against Social Security since it began, and now we have these private plans which might work if people had money to put in them, and some of us are fortunate enough to do so, but a lot of people live paycheck to paycheck -- personally I still think investing in the stock market is the best massy thing to do, but looking at the chart of the last 20 years I am not going to blame anybody who thinks it is a casino.
People are not committed, they are not engaged, they don't feel like stakeholders, they don't feel that they are valued, they see organizations such as schools, colleges, the military, corporations as exploitative, treating people like racehorses, burning them out, throwing them away.
At my local startup incubator there was this conversation I just couldn't take from some guy who had all this bullshit and weird ideas about networking and at some point it's like "bud... if you are talking to a VC they want to hear you are working on product and talking to customers"
Yet, disengaged people see something like "Y Combinator" and they see it like Harvard Business School, a credential, social proof because if you are disengaged you aren't experiencing the joy of learning, creating, etc.
https://en.wikipedia.org/wiki/Transformation_of_culture
In the modern era that can't happen because we've fine tuned mass media and marketing and educational indoctrination such that there is only one correct culture, that being the culture of the recent past. The one true life path was laid out for you before you were born, and if the world doesn't cooperate, you need to try harder.
In the long run you can't stop cultural transformation, but trying to hold it back via weird new artificial technologies means when it does snap it'll be a doozy, make the '60s look positively tame in comparison. Imagine trying to advance, say, 50 years, in a just a couple years. Things that work will be fun; things that crash and burn under the intense acceleration will not be so fun.
The snap will likely be fairly unpredictable. For example the dominant culture today is intensely progressive. The snap will almost certainly not be perfectly in phase or perfectly out of phase with progressivism.
We have a lot of drug selling inmates (0.5% of Americans are in jail for drugs). It's also an industry people can get jobs in without experience and that booms in a recession. These retired kids are probably being honest in saying they're not just 'staying at home'. They're probably selling drugs. It's a job. Just not one they want to list on a survey.