Millennials need to be world class savers for their slaver parents

From the Washington Post another kicking for Millennials. A number of analysts are looking at lower returns for investments over the next 20 years than the last 20 years (I broadly agree). This implies Millennials will need to double their savings:

If average annual stock market returns fall by two percentage points over the next couple of decades, a 25-year-old saving for retirement would need to more than double how much she is saving to make up the shortfall, according to an analysis by the Employee Benefit Research Institute.



So, for any Australian Millennials listening:

  • You are going to have to stump up world leading prices for Australian housing, so no more smashed avocado.
  • You will need to pay extra taxes so that your parents and other baby boomers can retire in comfort without having to pay tax on investment profits. This probably includes the profits on the over-priced property they just sold you.
  • You just paid (or are still paying) far more for your university education than your parents did. You are paying infinitely more than most of our politicians who had free university education. And your job/pay prospects are worse.

So, it shouldn’t be too much of an issue for you to double your savings rate so that you can retire without being a burden on society.

Just don’t run foul of Centerlink in the meantime.

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    • As someone who doesn’t invest in anything but was planning on doing so via ETFs, can you expand a bit on what the problem is? Picking winners seems way more dangerous than picking something that represents a basket of companies. Why would a lay person wanting to buy some shares try to pick between Coke/Pepsi when they could just pick up both via an ETF (I assume) ?

      • The supposed advantage of ETF’s is simply to be able to move quicker…. it is a delusion. An ETF cannot be more liquid than the underlying securities.. how could it possibly be without derivatives which make them much riskier ? Who will pay out the derivatives in a crisis ( No AIG next time ) In the future with our regulatory landscape ETF’s will be found to have more claims on the ETF than securities exist in the ETF, like the paper gold market now.

        Who knows how the queue to exit is handled in a crisis ? Institutional investors when they set up an ETF use baskets of assets called creation units, this is the solid basis that attracts investors but in a crisis I would think creation units get traded on a favoured basis, not the ordinary investor. Think about what happens on a day the ASX 200 drops 7%.. not unusual at all historically… do you really think you will be treated the same as MLC ?

        I just can’t see a real advantage over say a Vanguard index fund and real risks attached… read the fine print if you go with ETF’s, they are mostly different.

  1. Damien,

    It is just as likely that the slaver parents are gen x for someone who is 25.

    Not to mention that since gen x+y became a significant voting bloc with the arrival of John Howard, passed boomers as the dominant voting bloc in 2001, and according to the ABS in 2014 exceed boomers by 1 million voters. That is, if there’s a problem now, gen x+y have had a major influence for twenty years, and have been a majority for sixteen of those years.

    Further, check out the trajectory of house prices before and after gen x+y have had that dominance.

    House prices are a scandal. But if gen x+y are still blaming boomers after 20 years of gen x+y voter influence and dominance, at some point millennials are going to say: “Hey! Wait a minute!”

    • “gen x+y have had a major influence for twenty years, and have been a majority for sixteen of those years”

      You can’t mean a majority of the voting population can you?

      • Thanks for the link emess. I take your point that with every passing year the gen x + y’ers have more and more responsibility for the state of Australia’s policy settings.
        But the numbers in that ABS piece don’t support your comment about that cohort having been “a majority of the voting population for sixteen of those [20] years”.

      • So, by your calculation then gavin, how long would it have taken for gen x+y to accumulate that million extra voters?

        I actually had a link somewhere to a politics blog with a definitive calculation. However, that one million excess of gen x+y voters did not happen overnight, so were you to do a “back of the envelope” calculation, you’d get pretty close. After all, according to the ABS, those gen x+y have been voting for 12 years, and the numbers would have been ramping up till then. One could even believe they were a majority before 2001.

        That is, a million voters more for 12 years, and ramping up before that!

      • I think when you write ‘majority’ you actually mean ‘more than’. You should also consider that the ABS information you cite wasn’t counting the many Australian voters who are older than baby boomers.

      • I see what you are getting at gavin. I should have said that gen x+y are the largest voting cohort or similar to be precise.

      • When the ABS uses a non accepted version of generational definitions you can’t really perform any analysis on the data. Boomers it has broadly right with 20 years following the end of WWII. It then lumps X and Y into the next 20 years where they should be ~15 years each with the i or z generation starting ~1995.

    • Know IdeaMEMBER

      I tend to agree. It is not a clear case of Boomers, X or Y etc. There is a property obsessed element in society, and the availability of cheap credit and the length of time since a recession was experienced has given some the impression that they are clever. The clever ones will be those that sell at the right time, but getting that right is just plain luck in my respectful view.

      • Precisely. This obsession with pinning blame on boomers (or others), is a distraction from addressing the real issues. However, if people are always fixated on boomers, then they see no reason to change their own behaviours. That’s a problem.

    • Most Boomers will be dead in 20 years!
      Can’t come quick enough.
      Greedy fuckers that don’t give a shit about the country anymore , only their entitlements.
      Hopefully Black Swan before that so they get somewhat Shafted.

      • Lol. House prices only started taking off after gen x+y became the dominant voting bloc. But with any luck, the PPOR will become assessable under the assets test, boomers will all reverse mortgage leaving gen x+y with nothing. After all, it’s what you guys want, right? Oh, and since government bottom line will then depend on high house prices to keep pension costs down, wait up for another layer of government desperate to keep house prices high. Thanks gen x.

      • Quick to bite today. Not much time left I suppose.
        But that response is the Boomer attitude.
        Bring on lower immigration and China tanking!
        That will shut a few Boomer (fat ass)Pie Holes.

      • Susan Ley – Gen X
        Tudge (the guy defending Centrelink sending out the invoices) – Gen X
        Corey Bernardi – Gen X
        Christensen – Gen X

        Have to laugh really. I’m sure they are – at you.

    • exactly. Minority bashing is easy and disgusting.
      If millennials have boomer parents, those who succeeded according to the description here, would have paid for the millennials uni fees and be helping them. And a least these millennials with boomer parents inherit.

      Its the gen X + Y with neg geared properties like Sussan who who are in the way of millennials.
      The gen X+Y who have been largest numbers since the house prices started jumping and then gearing took off.

  2. ErmingtonPlumbingMEMBER

    So, for any Australian Millennials listening:

    You will need to pay extra taxes so that your parents and other baby boomers can retire in comfort without having to pay tax on investment profits. This probably includes the profits on the over-priced property they just sold you.”

    Lets just hope that the young aren’t asked to “Shake hands” when closing these shit sandwich deals,…it could get messy if they find they “cant resist”,

  3. Most Gen Y who dont own property don’t want prices to fall. They see them as fair market value. They are simply investors waiting in the wings to hop in and climb the ladder to riches. Without property speculation how else will Gen y get as rich as their parents did?

    Property is perceived as a Nobel endeavour and being a landlord is something to aspire to

    • Uranium GeoMEMBER

      Well Labrynth my cohort must be existing in bizzaro world because that is a topic of conversation runs counter to what is discussed with those I know.

      • macrofishMEMBER

        I am with you, none of my Gen Y friends want housing to stay so high as even the ones who own only have apartments that are to small to start a family but are unable to move up the mystical ladder due to the fact everything else is to expensive.

      • You must hang out with people who give it some thought. Most people truly believe that property only ever goes up so hoping for a fall is not even an option.

    • Ideological brainwashing done. In similar circumstances the young without context understand the recent experience as the ‘best of all possible worlds’.

    • As tempting as it is to think you left out the /s tag, the reality is that gen x actually support policies aimed at keeping house prices high…and then blame boomers.

      Exhibit 1: Campaigning to include the home in the pension assets test. Meaning the higher the residence’s value, the lower the pension payout and vice versa. Giving the Federal government a huge incentive for policies keeping house prices high. Yep, but soooo concerned about how much their kids have to pay for a house. /s

    • You must hang with different Gen Y than myself. Its a coin flip between “wanting a massive crash for retribution” and “wanting a massive crash so that I can buy a home and stop having to conform to inspections”.

  4. LOL

    50c an avo from our roadside cart

    You can grow an avo tree in Syd and Mel folks. In your backyard.

    Oh, wait

    • I see what you did there.

      Avocado trees take at least seven years to fruit. That is, as some hipsters say, forevs! They can’t wait that long for an smashed avocado.

      • Do they? Depends on climate. Mangos allegedly take as long – got a Kensington Pride fruiting in 4 and pecans in 3.

        In any case, if you don’t want to take a long term strategic view on your avocado holdings, carry on paying lulz totes city prices of 3 bickies, yo. For realz! I’m off to feed some slightly marked avos to the goats. LOLZ!

  5. Let’s be clear about this. Governments cannot be blamed for the fact that investment returns are falling (which is mainly due to advancing technology). Governments, however, CAN be blamed for the fact that they refuse to take it into account in their planning, and keep promising to pay existing retirees ridiculously generous benefits, on the assumption of continued 8% returns.

    • ErmingtonPlumbingMEMBER

      Every Economic relationship is a Political relationship and they are all Negotiable.

    • Yes, but governments also can control the proportion of productivity improvements that benefit various sectors. Since the mid 80s, the proportion of productivity benefits going to ordinary people has dried up, not “trickled down”.

      We could easily afford pensions etc, but for this appropriation of wealth by the banksters and robber barons.

      However, let’s do the work of the banksters, let them have almost everything, but fight amongst ourselves for the scaps.

  6. The Scab won’t heal until you stop picking at it!
    That or something similar was the only advice my Mum ever gave me for dealing with Teenage pimples, I sometimes wonder if the same sage advice shouldn’t be applied to Aussie Real Estate investing.
    We all know that this is worlds largest pimple and just one wrong move and it’ll spray puss for miles, unfortunately the pimple bursting is unlikely to be the end of the game because that’s when the infection will really get started. Once it pops every politician will have their filthy fingers at the ready, every known pathogen will be scratched into the festering mess, heck we’ll probably collectively agree to spring Obeid from prison figuring that his corrupt fingers can concoct a curative elixir…but nahh it’ll just prove to be a superbug killed all the other bugs before turning on the host.
    In the end analysis as I see it my mum’s the scab wont heal until you stop picking at it advice might prove to be the only path forward.

  7. “A number of analysts are looking at lower returns for investments over the next 20 years than the last 20 years (I broadly agree).”

    We don’t know what’s going to happen in 10 years time, let alone 20. I’ve gone back over a lot of years looking at forecasts and predictions for returns and there’s one consistent theme – no one has a clue. More specifically, every year there’s a “save more, returns will be lower story”.

    Here’s my analysis: We might get less than nothing. We might get 15 a year. Who knows.

  8. Who the hell puts their savings on the stock market anyway? Only the very rich. I’ve usually lost money when I have done it, unless I daytrade/position trade which is very time-intensive You are lucky to get 2.5% on term deposits – so redo the calculations.

    The real problem is very low interest rates – which assists the haves to take control at the expense of the have-nots.

    And you dont have ot be a millennial ot be saving for a home – I am.

    The probelm, stratngely enough, is ;low interest rates, whcih lets the haves keep accumulating and outbidding the have-nots. Whcih sounds counterintuitiva, but it turns out to be the way the market works.

  9. Washington Post is fake news site and its intentions are always suspect. The US is in a wave of social breakup and WP is not helping its country IMO.
    The USD and equities are expected to rise very high as money floods into these from the EU and peripheral states, the interest rates are expected to rise in the US this year and gov bonds rates rise… I think this article is not fact based.