Claire*, 42, was always told: “Follow your dreams and the money will follow.” So that’s what she did. At 24, she opened a retail store with a friend in downtown Ottawa, Canada. She’d managed to save enough from a part-time government job during university to start the business without taking out a loan.
For many years, the store did well – they even opened a second location. Claire started to feel financially secure. “A few years ago I was like, wow, I actually might be able to do this until I retire,” she told me. “I’ll never be rich, but I have a really wonderful work-life balance and I’ll have enough.”
But in midlife, she can’t afford to buy a house, and she’s increasingly worried about what retirement would look like, or if it would even be possible. “Was I foolish to think this could work?” she now wonders.
She’s one of many millennials who, in their 40s, are panicking about the realities of midlife: financial precarity, housing insecurity, job instability and difficulty saving for the future. It’s a different kind of midlife crisis – less impulsive sports car purchase and more “will I ever retire?” In fact, a new survey of 1,000 millennials showed that 81% feel they can’t afford to have a midlife crisis. Our generation is the first to be downwardly mobile, at least in the US, and do less well than our parents financially. What will the next 40 years will look like?
Gonna leave a bit of advice for any young folks that might see this. Something I wish to god someone had told me when I was 20.
Start an annuity plan. They’re generally stable, all but guaranteed to accrue money. You can set a percentage of your paycheck to be deposited automatically into the account. If you have the option to do this through your employer, do it, find out if they match the deposit like mine. Put 10% of your paycheck in there. After 10 years, I have $40,000 sitting in a retirement account with a progressive series of bonds set to mature in between now and my retirement age. Those bonds will roll back into shorter term bonds as they mature, and add more value to the account. My projected retirement age is still 72, but at least I know that money is there.
Also, after 4 years, the account matures and you’re able to borrow against it, like collateral for a loan. So if I wanted to right now, I could take that money and use it as a down payment on a house. I’ll be expected to put it back, but the interest is generally lower than a home owner’s loan.
Generally speaking in the US annuities are horrible and significantly underperform a regular 401k/IRA invested in a broad total market index fund. The fees eat you alive. Don’t know how it is in other countries. But annuities here are damn near fraud.
Annuities have been bad because they invest in bonds and interest rates have been very low in recent years.
Over the next 10-20 years stocks could crash and rates increase.
I mean, if this is what you believe, you can still invest in bonds in a 401k or brokerage account. Even if I believed this about stocks crashing, I still wouldn’t put any $ in an annuity.
Also, predicting the stock market and making huge decisions based on that tends to not go well.
The main benefit of an annuity over bonds is that it will keep paying out until you die.
A small annuity that just covers you and your spouses essential living expenses is not a bad investment.
I agree, large annuities are a waste.
But what happens if you have an annuity and need cash noooooowwwwwww?
Call J.G. Wentworth!
877-CASH-NOW!
The downfall of every one of my savings plans. At a certain point rent takes priority
This sounds a lot like superannuation that we have in Australia and is mandatory. A certain amount of money from your paycheck is put with a super and they invest it for you, and the idea is that you should have a few hundred grand by the time you retire.
In the US that was Social Security but currently it’s broken