Lori Rodriguez, a 27-year-old communications professional in New York City, is not saving for retirement, and it isn’t necessarily because she can’t afford to — it’s because she doesn’t expect it to matter.
Like many people her age, Rodriguez believes climate change will have catastrophic effects on our planet. Some 88% of millennials — a higher percentage than any other age group — accept that climate change is happening, and 69% say it will impact them in their lifetimes. Engulfed in a constant barrage of depressing news stories, many young people are skeptical about saving for an uncertain future.
“I want to hope for the best and plan for a future that is stable and secure, but, when I look at current events and at the world we are predicting, I do not see how things could not be chaotic in 50 years,” Rodriguez says. “The weather systems are already off, and I don’t think it’s hyperbolic to be a little apocalyptic.”
Mental-health issues affecting young adults and adolescents in the U.S. have increased significantly in the past decade, a study published in March in the Journal of Abnormal Psychology found. The number of individuals between the ages of 18 and 25 reporting symptoms of major depression increased 52% from 2005 to 2017, while older adults did not experience any increase in psychological stress at this time, and some age groups even saw decreases. Study author Jean Twenge says this may be attributed to the increased use of digital media, which has changed modes of interaction enough to impact social lives and communication. Millennials are also said to suffer from “eco-anxiety,” according to a 2018 report from the American Psychological Association, with 72% saying their emotional well-being is affected by the inevitability of climate change, compared with just 57% of people over the age of 45.
Meanwhile, two-thirds of millennials — defined by Pew as the generation born between 1981 and 1996 — have nothing saved for retirement, according to the National Institute on Retirement Security. The millennials who are saving had an average balance of $25,500 and were contributing 7.3% of their paychecks as of the second quarter of 2018, figures from Fidelity showed. While most millennials say they are not saving because they simply can’t afford to, for others it’s about the feeling that they may not have a future to save for, says Matt Fellowes, chief executive officer of United Income, an online retirement investment platform based in Washington, D.C.
“There is a certain fatalism in this population relative to more recent generations,” Fellowes says. “Psychologically, this population has had more shocks to expectations about their futures than past generations. From a perception point of view, I hear a lot of cynicism about the ability to build retirement savings or whether they will be able to retire at all.”
Climate change may also have direct, and devastating, effects on the finances of young people, an August 2016 study from environmental advocacy organization NextGen Climate found. The median 21-year-old college graduate in the class of 2015 will lose over $126,000 in income over her lifetime to climate-change-induced costs and $187,000 in wealth if that income were to have been saved and invested, the study, titled “The Price Tag of Being Young,” found.
A perennial problem
From the chaos of World War II to the draft for the Vietnam War and the looming threat of nuclear conflict during the Cold War, every generation has its own source of doubt about the future, but millennials are uniquely poised to distrust systems propping up the concept of retirement, says Brad Klontz, 48, associate professor of practice at the Financial Psychology Institute. The current generation of young people witnessed the dot-com bubble burst after the turn of the millennium, the terrorist attacks of Sept. 11 and the wars that followed, and the stock-market crash in 2008 and the associated housing crisis.
“What happened in 2008 was an incredible financial flashpoint for millennials,” he says. “After watching their parents lose a job or a home, millennials are contending with a deep distrust for financial institutions and the stock market. That brings out catastrophic thinking, because they’ve already seen a catastrophe.”
Although hard data show that, in practice, many young people are still investing at a steady rate, surveys show they remain skeptical. Rodriguez says she has grown increasingly wary of capitalism and has become convinced we are witnessing its final stages. She’s not alone: The number of millennials who view capitalism positively fell from 68% in 2010 to just 45% in 2017.
“I was in college when the financial collapse happened, and I remember the intense dread and panic around me as people who played by the rules of the system and did everything right lost all of their savings,” she says. “What will prevent that from happening again? The system doesn’t work.”
But this outlook has not made her financially reckless: Rodriguez carries no credit-card debt, faithfully pays the minimum on her student loans each month and has a credit score of 750. She also keeps six months of living costs in a savings account in case of emergency.
“I hope for the best and prepare for the worst,” she says. “But I can’t imagine what my life will look like when I’m retirement age. It’s hard to plan for a future and have faith that money will mean anything anymore.”
How to get millennials to save
Of course, personal-finance experts do not recommend avoiding saving for retirement because of the possibility of a climate catastrophe. And Fellowes says United Income research shows that, when it comes to retirement, millennials respond most favorably to peer pressure.
“A good solution to help people save is to tell them what people in their income profile are doing, essentially asking, what’s wrong with you? Your peers are doing this, and you should do better,” he says. “Of course, we wouldn’t use that wording.”
While he considers climate-change concerns valid, some millennials may be using them as an excuse not to save, the Financial Psychology Institute’s Klontz says. Setting aside money for the future rather than using it in the moment is fundamentally difficult for human beings, he says, as a tendency to avoid thinking about the future is hard-wired into our brains. In hunter-gatherer societies, people only saved as much as they could carry to the next location.
“Saving money goes against our natural wiring in terms of how our brains have developed over the years,” Klontz says. “It’s difficult to save for the future because it comes at a literal cost. To save, you have to overcome this fear with some relatively intense alternative emotions.”
To override the natural resistance to saving for things like retirement, people have to home in on positive visions of the future, studies show — or extremely negative ones, Klontz says.
People who create specific visions of what they want from retirement — where they will live, whom they will spend time with, how they hope to spend time — are more likely to save, a 2011 Stanford University study found. If one’s vision of the future is hopeless and bleak, saving will be psychologically very difficult, Klontz says.
“With a depressed view of a terrible future, of course you won’t want to save — who would?” he asks. “The future might be terrible. But chances are it won’t be. Chances are, the world will still exist in 40 years, and you will need money to meet your needs.”
Alternatively, Klontz offers, young people can be scared into saving money. Because one thing that’s worse than not having a future is not being prepared for a future that comes to pass anyway.
Changes already being made
Many people are already making major adjustments to traditional life plans to account for future climate-change effects. Dan Sheehan, a 28-year-old writer in Los Angeles, says he has chosen not to have children or a family, a decision that has also contributed to his not saving for retirement. Some 30% of people who have chosen not to have children have done so due to climate concerns, according to a 2018 report by the New York Times.
“For me, one of the main reasons to save for retirement is [that one expects to have] a family and a full life at 80,” he says. “But the more you read the more you feel like, unless something very radically changes soon, it’s going to be downright cruel to have children in the future.”
Human beings only have 12 years to make meaningful adjustments to our environment if we are to roll back an otherwise inevitable climate-change-related disaster, the world’s top scientists concluded in a report released by the UN Intergovernmental Panel on Climate Change (IPCC) in December. If urgent and unprecedented changes are not made while that 12-year window remains open, the planet will be engulfed by extreme heat, drought, floods and poverty by 2050, the nonpartisan report predicted.
Whether to have children was on Sheehan’s mind when he and other employees at a previous writing job attended a work-sponsored meeting about opening a 401(k) two years ago. Sheehan and many of his colleagues left the meeting without starting accounts. He still has no money saved for retirement and has only grown more resolute in this decision since then.
“When I was young, watching the first calls to arms against climate change, it felt like this thing we were all going to have to band together to get rid of,” Sheehan says. “Instead the next 10 years were spent staring into the storm and doing nothing.”
Many millennials can’t save anyway
Sheehan admits that climate change was not the only factor in his decision to opt out of a 401(k); he also found that a voluntary paycheck deduction would make it hard for him to pay rent and afford the cost of living in Los Angeles.
Most nonsaving millennials say financial constraints are the top reason. The average student-loan debt is $37,172, according to The Wall Street Journal. And, while the cost of living has gone up, wages have remained stagnant over the past 30 years.
“When I looked at how much I was going to have to cut back my lifestyle to afford to be able to save, I felt very defeated,” Sheehan says. “In order to have a chance at retirement in the future, we have to live vastly differently now, in a way I don’t think prior generations were ever forced to do.”
Similarly, Rodriguez said that, even without the threat of climate change, she likely couldn’t afford to save for retirement — and might not need to. Because she comes from a Latina family, she says culturally it is expected she would move in with family in old age and not have to pay as much in retirement costs.
“Both of my parents are immigrants. I did not grow up in a culture of professionalism. I graduated with thousands in student loans — I have never made enough money to save for the future,” she says.
Although she does not save money for retirement, Rodriguez does take action for the future: she’s taught herself to garden (“in case of a total collapse of the food system,” she says) and invests in learning hands-on skills like mechanics and bike repair.
“It’s kind of my own version of retirement,” she says.
Erin Lowry, author of “Broke Millennial Takes On Investing,” recommends preparing for retirement no matter what you believe will happen, referencing the Y2K phenomenon, when some people sold their belongings and made other rash choices in the belief that the world would end with the dawn of the year 2000.
“Even if you have a defeatist mind-set about the future of the planet, it’s better to prepare as though you, and the planet, will survive into your retirement years because the alternative is also bleak,” she said. “Failing to properly plan for a future means guaranteeing yourself a more difficult life.”
Read more of the Best New Ideas in Retirement
• This is how much you need to save for retirement
• Long-term care insurance is a dying industry. Here are new ways the high costs of aging
• How robots and your smart fridge can help keep you out of a nursing home
• You’re probably not ready to retire — psychologically
• Retirement is an emotionally and financially charged life stage — ignore it at your peril