Piershale: Helping younger generation a challenge

As the American population ages into retirement, younger generations might be the ones responsible for picking up the pieces.

There’s only one problem: The younger generation is in no position to do so.

A study published March 15 by the Urban Institute found Americans from young adulthood up to about age 40 have accrued less wealth than their parents at the same age even as the average wealth has doubled over the past quarter-century. 

So, what is to blame? The truth is it’s not a single issue. A broad range of economic factors has conspired to suppress wealth building for younger American workers. According to the study, they face a number of issues, such as stagnant pay, declining median incomes, a housing collapse and soaring student debt. 

The cost of college tuition today is one of those economic factors.

“Rising tuition threatens to discourage all but the well-off from going to and finishing college, restraining future economic growth, and widening the gap between winners and losers in the U.S. economy,” wrote David Wessel, economics editor and columnist for The Wall Street Journal. “The College Board says over the past 20 years, the inflation-adjusted average published cost of tuition and fees at a four-year state university have more than doubled. Factor in scholarships and tax breaks, and it’s still up more than 50 percent.

“Over the same period, the income of the typical family in the middle class has risen only 7 percent. That’s one reason student borrowing is up so much.”

In addition to these challenges, public policy now burdens the young with ever-increasing interest payments on the federal debt. The study said the cost of preserving retirement and health benefits for older Americans and baby boomers should not be passed on to younger generations that already have been losing out on their share of private wealth. If current trends are not reversed, today’s younger Americans might be more dependent when they retire on safety-net programs that are less capable of providing basic support, according to the study.

“In this country, the expectation is that every generation does better than the previous generation,” said Caroline Ratcliff, an author of the study. “This is no longer the case. This generation might have less.”

Over the years, we have seen increasing numbers of parents and grandparents spending more than they anticipated for their children and grandchildren. And, with increased longevity, this might affect their own retirement plans in the years ahead.

Take the first step to ensure your retirement by doing a financial plan. It’s crucial to helping you decide the amount you can contribute, if any, and how it might affect your retirement.

No matter what issues either generation face, having a plan helps ensure you’ve done everything you can to prepare yourself for the challenges of the future. And, that is a responsibility both generations must realize.

• Mike Piershale, a chartered financial consultant, is president of Piershale Financial Group. Send any financial questions you wish to have answered in this column to Piershale Financial Group Inc., 407 Congress Parkway, Crystal Lake, IL  60014. You also may fax them to 815-455-6453 or email

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