MONEY 401(k)s

Get the Most From Your 401(k) at Any Age

To get the most out of your retirement savings, put the right amount in and take the right steps at all stages of life. Here's some advice to follow, whether you're just starting out or further down your career path.

 

Millennials

Millennials Start small, then auto-escalate. Less than half of workers ages 22 to 32 are saving for retirement, despite how painless it can be. Socking away 3% of a $50,000 salary ($1,500 before taxes) costs you less than $22 a week in take-home pay. Then take baby steps by auto- escalating your savings by one percentage point a year. In plans with auto-enroll and a 1% auto-escalate feature, nine in 10 participants are able to safely generate 60% of their age-64 income, adjusted for inflation, according to EBRI.

Take the easy way out. More than two in five millennials in retirement plans aren’t familiar with their investment options. No problem: Just go with a target-date fund, which automatically adjusts your portfolio to be less risky as you age. The worst-performing target-date investors at Vanguard earned 11.8% annually over the past five years, far outpacing the worst DIYers, who gained just 2.1%.

Roll over as you go. Twentysomethings typically spend 1.3 years at each job. And Fidelity says nearly half cash out 401(k)s when leaving. That triggers income taxes and a 10% penalty, depleting the amount that can compound. The box shows what that really costs you.

Gen Xers

Gen Xers Keep the bottom line top of mind. A funny thing about investing: The more you save and the bigger your balance, the more fees you have to pay in dollar terms. So now that your account has some serious money, shifting to lower-cost options such as an index fund is an easy way to save big (see chart). If you have $100,000 saved by 40 and underlying returns average 7%, the savings by 65 of switching from a 1.2%-fee fund to 0.3% is $102,000—nearly a whole second nest egg.

Shoot for 17%. How much you need to save depends on how much you already have. But 17% is a good mental anchor. That’s the number Wade Pfau of the American College of Financial Services came up with for folks starting from scratch at 35, with a 60% stock/40% bond portfolio, to safely fund a typical retirement goal. You might be okay saving less if the markets go your way, but Pfau’s number is what it takes to get there even with poor returns. That’s far more than the average 401(k) contribution of around 6% to 7%. But take a deep breath. That number includes the contributions from your employer.

Resist the urge to borrow. About 22% of participants between 35 and 54 in plans run by ­Vanguard have borrowed from their retirement accounts. Compared with other forms of debt, a 401(k) loan isn’t the worst. But the amount that you borrow is money that’s not compounding tax-deferred.

Baby Boomers

Baby Boomers Save in bursts. Neither saving nor spending runs along a smooth path. For example, you may have to pare back savings while paying the kids’ college bills. The good news is that “after 50 is when people should be able to save the most, as their kids are moving out, they’ve paid off the mortgage, and they should be in the highest earnings years of their lives,” says economist Wade Pfau. Starting at 50, you can also make extra 401(k) contributions of up to $5,500, on top of the normal $17,500.

Prep for the spend-down phase. Once you retire, you’ll have to spend out of your nest egg regardless of market conditions. Even if stocks do well on average, a bad run early on can deplete your portfolio. So “start taking a couple percent of equities off the table every year in the five or 10 years leading up to retirement,” says financial adviser Michael Kitces.

Readjust your target. According to polls, Americans expect to retire around 66. But the actual age of retirement is 62. Things happen: You may run into health issues or be forced into early retirement. Now many 401(k) savers use target-date funds. As you gain more visibility on your own retirement date, adjust the ­target-date fund you use. As the chart shows, it can make a big difference. Notes: Cash-out growth assumes a 5% annual return. Fee calculations are based on total costs, including forgone gains. sources: Morningstar, T. Rowe Price, SEC, MONEY research

MONEY Careers & Workplace

Why ‘Millennial Bashing’ In the Workplace Needs to Stop

This is the year we stop shaming Millennials at the office or, uh, wherever it is they work.

The volume of research on Millennials grows by the day, and we’re gradually learning that this much-maligned generation of 80 million is finding its footing on some important fronts—especially the workplace, where they overwhelmingly see their job as a means for doing good in the world.

Nine in 10 young adults believe they are actively contributing to an organization that is having a positive impact, according to the 2014 Millennial Impact Report from Achieve, a research and branding firm, and the Case Foundation, which promotes positive change. An employer’s position on giving back plays a big role at every stage of a Millennial worker’s career. The report found that:

  • What a company makes and sells is the top consideration for Millennials when applying for a job.
  • A company’s support for a cause is one of the most important factors in deciding whether to apply there.
  • Nearly half of Millennials had volunteered for a cause or nonprofit through their workplace in the past month.

Surpassing even baby boomers in number, Millennials are making their mark in a lot ways. They have different dreams. They are changing banking, and in some ways they are ahead of the game in terms of saving for retirement. But the workplace is where they are having the biggest impact.

A Hartford trend report called The End of Millennial Shaming notes that these young adults “are not kids anymore” and that this is the year “we end the Millennial bashing once and for all.” This generation is now invading the workforce and “taking on more and more leadership roles in business, government, communities and culture.” The Hartford found that 41% of Millennials already have four or more people reporting to them and that 78% consider themselves leaders in some part of their life.

The message to employers is clear: It is time to adapt to the next generation’s style of work. That means more collaboration, teamwork, flexibility and use of go-anywhere technology. It also means that companies that really are trying to solve the world’s problems will attract the best talent. Fulfilling passions and fully utilizing their abilities are among the top reasons Millennials cite for staying with a company, the research shows. From the Achieve/Case report:

Today’s forward-thinking companies are looking at the future of corporate social responsibility and how employee cause-work, company-branded volunteering and pro bono programs based on skills can play a role. For a company desiring to build a culture that resonates with this growing demographic of current and future employees, leveraging their passions is crucial.

The good news for employers is that the best talent is ripe for picking. Millennials have little sense of employer loyalty. More than half expect to have between two and five employers in their lifetime and a quarter expect to have six or more, PwC found.

And right now Millennials are feeling more burned out from work than any other generation. Among Millennials looking to switch jobs, 86% say they feel exhausted by their jobs. That compares to 76% of more experienced workers looking for a change, according to a Monster.com workforce talent survey.

The workforce will bend to this generation’s will, just as it largely equalized opportunity for women, made the office a home away from home, and adopted casual Fridays for 78 million baby boomers. What’s exciting about this next generation is that it really does want to make the world a more sustainable and peaceful place, and is calling on the resources of capitalism to deliver.

 

 

MONEY retirement planning

Forget About Saving. Just Go on Vacation.

Mickey Mouse posing with the Gaither quintuplets
You budgeted for your Disney World trip, but did you count the hit to your retirement savings? Gene Duncan—AP

Americans get retirement saving backwards: We think about it more when there's less time to do it. Millennials, now's the time to fix on the problem.

More people plan for their next vacation than plan for their retirement, new research shows. This won’t shock anyone who has followed the retirement savings crisis in America—or scraped together $12,000 for a family trip to Disney World. What’s striking, though, is how totally upside down our thinking is on this issue.

The amount of time we spend thinking about retirement increases with age across every cohort, the financial services firm Edward Jones found. That makes sense until you think about it. By the time you are in your 60s it may be too late to make much of a difference in your nest egg. A little more thinking in your 30s would go a long way.

Yet Jones found that time spent thinking ahead about retirement rises dramatically with age. Among those 18 to 34, only 9% say retirement planning is top of mind. The share rises to 31% among those 35 to 44, to 37% among those 45 to 54, and to 40% among those 55 to 64. Overall, Jones found that 28% of Americans have the next vacation top of mind while 25% have retirement planning and 22% have paying for college top of mind.

Once upon a time, retirement planning could wait. More workers had pensions and retiree health benefits. Planning was more about when to take Social Security, who to designate as beneficiaries, and how to trigger pension payments. Today, if you don’t start thinking about retirement before 55 you are either wealthy or out of luck. Yes, important adjustments can be made at any age—like taking advantage of catch-up tax-deferred savings rules, working longer and delaying Social Security benefits. But the real juice is in saving early and often.

Compound growth for an extra 20 years, or even just 10, can more than double your savings over 35 years. Investing $2,000 a month and earning an 8% return would provide $399,082 over 35 years, according to data from T. Rowe Price. Savings after 25 years would total $165,457; over 15 years, just $60,203.

So when only 9% of young adults say that retirement planning is top of mind, it means that 91% are at extra risk of falling short in the long term—and doomed to think about retirement finances much more often when there is much less they can do about it.

MONEY financial advisers

Investment Start-Ups Shake Up Financial Industry

Companies targeting mass-market millennials say they're forcing lower prices and greater transparency.

Led by a group of start-ups that have emerged in the last two years to offer previously expensive and exclusive financial services on a low-cost basis to a mass audience, the financial services industry is starting to adapt its ways.

The changing way of doing business is resulting in lower fees and more transparency about services, leaders of the start-ups say. And instead of failing or being gobbled up by larger entities, these online money management and investment product companies have been growing exponentially.

A snapshot of the growth revealed recently at the Reuters Global Wealth Management Summit in New York:

  • Wealthfront.com, a provider of low-fee investment management aimed at tech-savvy millennials, born after 1981, recently crossed $1 billion in assets under management, achieving that feat in two years. (Its closest cohort in the space, Betterment, now has $630 million under management.)
  • SigFig.com, which aggregates accounts and offers investing advice, but does not directly take in assets under management as its main service, tracks $200 billion. The company is on its way to tracking $1 trillion in the next year, said chief executive Mike Sha.
  • Hedgeable.com, which provides low-fee alternative investment products directly and has broad distribution on many traditional platforms such as Fidelity and TDAmeritrade, has $400 million in assets under management. With just six employees, the company is cash-flow positive and developing new products all the time.

For anyone thinking that sounds like a good target for an acquisition, Hedgeable’s chief executive, Michael Kane, said, decidedly, “We are not for sale.”

Already, the companies see their influence in fee slashing industrywide as well as on greater transparency. Firms like LPL Financial, Wells Fargo, and Edward Jones are trying to lower fees by offering bundled services, Kane said.

In five years, 90% of these companies will be offering flat-fee pricing for all of the services they offer a retail client, Kane predicted.

Change is also at hand as traditional firms rethink their pricing model, going from a percentage of assets under management to flat fees. SigFig has helped move this along by showing customers exactly how much they are paying in fees yearly. For clients who have money in traditional mutual funds at a brokerage, fees average $7,000 per year. More than 90% of those costs are avoidable, Sha said.

“Over 30 years, that’s staggering,” Sha said.

Another shift: how firms service customers who don’t have huge account balances. While traditional advisers often have high minimums of $500,000, Wealthfront accounts start at $5,000. In the last few weeks, the company has added about $100,000 in assets under management, all without needing to grow their 40-person staff.

Wealthfront chief executive Adam Nash understands why the big firms still mostly go after baby boomer clients, who control $15 trillion in wealth versus $2 trillion for millennials, a third of whom are still in college.

But Nash sees growth for Wealthfront as millennials age, and wants to engage them as early as possible. The company recently fielded a slew of complaints from college students who couldn’t sign up accounts, so the company lowered its minimum age to 18 from 21.

MONEY Savings

Despite Lessons of Recession, Many Are Ill-Prepared for a Crisis

Emergency box broken
Peter Crowther—Getty Images

One in four Americans have no savings set aside for an emergency, a new survey finds.

When it comes to your finances, you need to be prepared for the unexpected: a gap between jobs, a health crisis, a leaky roof that needs to be repaired. But 26% of Americans have no savings set aside for an emergency, according to a new report from Bankrate.com.

What’s more, many of those who do have a rainy day fund have too small of one. Only 23% of Americans say they have set aside at least six months’ worth of living expenses—the commonly recommended minimum. For 24% of Americans, an emergency fund would last less than three months, the survey found; another 17% have enough money for three to five months of expenses.

Americans have been poor savers for decades, notes Bankrate.com financial analyst Greg McBride. “What did change since the recession was the recognition of the importance of emergency savings,” says McBride. “Americans know that having emergency savings is important, they know they don’t have enough, and they feel very uncomfortable about that. But despite that, they’re just not making any progress.”

These findings jibe with MONEY’s recent survey of Americans and their finances, which found that while Americans are exercising more financial restraint than they did before the recession, they still aren’t saving as much as they should.

Six in 10 told MONEY that they were trying to build their emergency savings, up from less than 25% who said the same in 2009; three-quarters reported cutting back on spending. Still, 58% wouldn’t be able to handle an unexpected $10,000 expense. Even high-income families would feel the pinch—38% of those earning more than $100,000 said they wouldn’t be able to cover a $10,000 surprise.

Similarly, the Bankrate survey found that insufficient savings crosses all income groups: Among households with incomes of $75,000 or more, only 46% have a six-month emergency reserve.

Another alarming finding: Americans age 30 to 49 are the worst off. One-third don’t have anything saved for a rainy day.

“That’s a pretty scary finding in that they are more likely to have the house, two cars, three kids, the dog,” McBride says. “They need those emergency savings more than anybody.”

The bright spot? Millennials may have learned from their elders’ mistakes. More than half—54%—have three- to five-months’ worth of expenses set aside in cash.”Young adults have had a front row seats for the recession and the anemic recovery,” says McBride. “They’ve recognized the need for emergency savings.”

Need another impetus to build up your rainy day fund? In MONEY’s recent survey on marriage and money, 25% of couples say they fight about insufficient emergency savings.

For more on budgeting and saving:

MONEY retirement planning

Leave a Financial Legacy? Boomers and Millennials Slug It Out

Unlike older Americans, young adults want to leave an inheritance to future generations. Too bad they're investing in cash.

Baby Boomers like to point out that our famously self-absorbed generation advocated for many good causes as youngsters and turned the corner to greater giving in retirement. Much of it is true. But younger generations are way ahead of us, new research suggests.

Maybe it’s a case of our kids doing as we say, not as we do. Boomers are the least likely generation to say it is important to leave a financial legacy—even though they have benefited from an enormous wealth transfer from their own parents, according to a new U.S. Trust survey of high net worth individuals. How’s that for self-absorbed?

More boomers have received an inheritance (57%) than say it is important to leave one (53%). The opposite holds true for younger generations. Some 36% of Gen X and 48% of Millennials have received some type of inheritance while 59% of Gen X and a whopping 65% of Millennials say it is important to leave one.

Circumstances may account for the difference in mindset. The Great Recession struck just as boomers were preparing to call it quits. With more to lose, and little time to make it back, boomers suffered the worst of the crisis from a savings point of view. A financial legacy seems less important when you are downsizing your retirement dreams.

For younger generations, the crisis created an employment nightmare. But it drove home the need to begin saving early, and those that did have seen stock prices double from the bottom and house prices begin to rebound as well. Millennials’ problem may be that they still don’t trust the stock market enough.

Well more than half in the survey remain on the sidelines with 10% or more of their portfolio in cash. Millennials are the most likely to be tilting that direction. Two-thirds of Millennials, the most of any cohort, say they are fine carrying a lot of cash and just 13%, the least of any cohort, have plans to invest some of their sideline cash in the next 12 months. This conservative nature threatens to work against their desire to leave a financial legacy—or even retire comfortably.

Millennials are the youngest adult generation and have the most time to absorb bumps in the stock market and benefit from its long-term superior gains. Intuitively, they know that. In the survey, those holding the most cash, regardless of age, were the most likely to say they missed the market rally the past few years and are not on track to meet their goals.

In our younger days, boomers rallied around things like civil rights and workplace equality for women, among other grand moral battles. But we didn’t necessarily put our money where our mouth was. Today’s young adults are quieter about how to fix the world. But they are willing to invest for change. One-third of all high net worth individuals invest in a socially conscious way while two-thirds of Millennials do so, U.S. Trust found.

By a wide margin, more Millennials say that investment decisions are a way to express social, political or environmental values (67%). Most (73%) believe it is possible to achieve market-rate returns investing in companies based on their social or environmental impact, and that private capital from socially motivated investors can help hold public companies and governments accountable (79%). I’d say the kids are alright.

TIME Marriage

More Millennial Mothers Are Single Than Married

Despite the anxiety society still feels about single mothers, most American mothers aged 26 to 31 had at least one child when they were not married. And the number of these millennial single mothers is increasing. In fact, in a study just released by researchers at Johns Hopkins University, only about a third of all mothers in their late twenties were married when all their kids were born. And two thirds of them were single when at least one of their kids were born.

The less education the young women have the higher the probability that they became a mom before they got married. Conversely, the married moms of that generation probably have a college degree. “It is now unusual for non-college graduates who have children in their teens and 20s to have all of them within marriage,” says Andrew Cherlin, one of the authors of the study “Changing Fertility Regimes and the Transition to Adulthood: Evidence from a Recent Cohort.”

Sociologists such as Cherlin have been tracking the decline of marriage as one of the milestones or goals of an individual’s life—the whole “first comes love, the comes marriage, then comes the baby with the baby carriage” paradigm. And it’s clear that an increasing number of young people are just not putting a ring on it. “The lofty place that marriage once held among the markers of adulthood is in serious question,” says Cherlin.

Motherhood is beginning to show the fissures along income and education lines that have already appeared in other aspects of U.S. society, with a small cluster of wealthy well educated people at one end (married with kids), a large cluster of struggling people at the other (kids, not married) and a thinning middle. While many children raised by single parents are fine, the advantages of a two parent family have been quite exhaustively documented. Some of these advantages can be tied to financial resources, but not all.

Among people with kids between the ages of 26 to 31 who didn’t graduate from college, 74% of the moms and 70% of the dads had at least one of those kids while single, Cherlin found. A full 81% of the births reported by women and 87 % of the births reported by guys were from people who didn’t finish college, so some of these single, lower education parents had more than one kid.

The chart below, using data from the National Longitude Study of Youth 1997, which looks at people born 1981 to 1984, shows all the births reported by women who didn’t get through high school, how old they were when their kids were born and whether they were married. Only a quarter of these young moms were married, slightly more than a third were living with someone, not necessarily the child’s father, and almost 40% had no partner at all.

 

unmarried mothers high school
Johns Hopkins University

 

Among college graduates, the picture is a little different. These young women account for fewer births—college graduates delay having kids generally—and as the number of births goes up, so does the number of marriages. “If marriage retains its place anywhere, it would be among the college graduates,” said Cherlin, “The difference between them and the non-college-educated with regard to the percentage of births within marriage is so striking as to suggest a very different experience of early adulthood.”

Johns Hopkins University

 

The study points out that unmarried couples have a high break up rate in the first few stressful years after the birth of a child and that this often leads to what’s called “multi-partner fertility” in the academy and “a lot of different baby mamas” in the rest of the world. This kind of family instability, with step-siblings and half siblings and a lot of fleeting parental figures can be tough on both finances and on kids and leads to the calcification of social inequality “The sharp differentiation by education in the transition to adulthood,” says the study, “is another indicator that American society is moving toward two different patterns of family formation and two diverging destinies for children.”

MONEY Family and Money

Boomer Women More Confident Managing Money, but Millennials Enjoy It More

New survey compares financial confidence among different generations.

Who’s more cocky about their financial savvy—Gen Y women or Boomer women? Turns out both are, just in different ways.

A study released today by Ameriprise Financial found that women nearing retirement feel most in control of their finances. Nearly eight in 10 have a clear financial plan they’re comfortable with (vs. 55% of younger women), and three quarters feel confident that their careful planning will pan out (vs. 63% of younger women). Six in 10 say they feel a strong sense of control when it comes to saving and investing (though the Millennials are closing in at 58%).

Boomer women’s confidence may be tied to their level of involvement in financial decisions along with their years of experience. Nine in 10 say they are primarily or jointly responsible for long-term saving and investment decisions in their households. And older women are more likely to feel at peace with their past financial decisions. Nine in ten boomer women say they feel confident about the financial decisions they’ve made in the last few years. compared to only 83% of millennials, and 80% of boomers say they are satisfied with what they’ve achieved, while unsurprisingly only 66% of younger women feel the same.

Across all generations, two in five women consider themselves the primary financial decision maker, though a majority of these women (63%) are doing so out of necessity, as they are either unmarried or divorced. Among women who’ve chosen to take the lead for their household, only 37% are in long-term relationships.

What’s particularly interesting, though, is that millennial women are more likely than older generations to say that they’ve taken control because they are more knowledgeable than a spouse and because they enjoying making these decisions.

Part of this confidence in their financial know-how could be attributed to early education from their parents, Ameriprise postulates. Six in 10 young women ages 25 to 34 learned about finances from Mom and Dad, while only 43% of Boomer women could say the same.

Millennial women are also more likely to feel that success is defined by making informed financial decisions, and they are also more likely to tweak their financial strategy in reaction to a life milestone or challenge than older women.

MONEY buying a home

Top Reasons Millennials Shouldn’t Buy a Home — Yet

couple standing by outline of house
Martin Barraud—Getty Images/OJO Images

Many millennials want to buy a home. But maybe they shouldn't just yet, says Trulia's consumer expert.

There are many reasons to buy your first home, including dozens of financial benefits and lifestyle benefits. And right now, it’s a buyer’s market; interest rates are still low, hitting 4.34% for a 30 year fixed loan this month. According to the latest Trulia survey, 68% of Millennials are in the market for a home priced at $200,000 or lower. However, home buying is not for everyone. For all the positive aspects to home ownership, there are some very compelling reasons not to buy a home right now. So, if you’re ready to jump headfirst into the ‘American Dream,’ read this first.

More: Why This Millennial Will Send My Son To College Before He Buys a Home

Losing Flexibility

Home ownership provides stability, but that may not always be a good thing when you are in your career-building years. If you are looking for a promotion, an advance, or job change, you may have to relocate to get to that next level. You need to have the ability to move on short notice, maybe even as fast as 30 to 60 days. Having to sell your home quickly could force you to offer it up at a bargain price to snag a buyer, in addition to incurring thousands of dollars of closing costs.

No Room For Baby

Millennials are in the prime years for starting families. You may not have one now, but chances are you may in the near future. So, buying that cozy home or condo perfect for the two of you may not be such a great idea when baby makes three. Afterall, having a baby is stressful enough. Having to sell your house to buy a larger one with a due date looming can be unbearably stressful, costly, and may even put you in the red.

Five Years In

If for any reason you think you may not be able to stay in your home for five to seven years, you should not buy. It will be cheaper to rent. The rule of thumb used to be seven years, but now that the housing market is stabilizing, that timeline has shifted slightly. With only moderate market appreciation, it will generally take five years for you to recoup the costs of buying, selling, and carrying costs. Unfortunately, in the first years of your mortgage, you won’t be building up too much equity. Banks charge a hefty portion of your interest upfront, with very little going to your principal in the first few years.

No Money Down, No House

If you don’t have enough money saved for a down payment, don’t buy a house right now. I am a big proponent of 20% down. That is not always feasible for most Millennials starting out, and it is lot of money to have saved up. But, unfortunately, it is the safest, most conservative approach to home ownership. If you can’t bank on Mom and Dad for a leg up on the down payment, then you need to keep saving.

Too Much Debt

Student loans, car loans, and any other debt you have accumulated are all reasons not to buy a house just yet. You will need to pay down your debt first. Not only will a home purchase put a dent in you debt reduction plan, banks will not be willing to approve you for a loan with a high debt-to-income ratio.

Shaky Job Security

First, purchasing a home with today’s new qualified loan standards requires some consistent job history. When you’re in the early stages of your career, there may be jumps and gaps in your history, so getting the loan is going to be a challenge. Once you own a home, be aware that job situations can change overnight. Losing a job, periods of unemployment, and changes in income are not as easily weathered when you own a home. Your income may change, but your housing costs will remain the same. You won’t be able to quickly downsize, leaving you to sell your home out of financial desperation.

Cash Poor

Home buying often leaves buyers cash poor. After you dip into your savings to come up with the down payment, the closing costs, and any renovation that you need to make prior to moving in could leave your bank account in the double digits. That is not the way you want to start living the ‘American Dream.’ Make sure you will have enough cash leftover to weather a job loss, an unexpected emergency, or even a health issue that could impact your earning power. Bottom line: Don’t end up house rich, cash poor and emergency fundless.

More from Trulia:
9 Things to Look For When Touring An Open House
The Pros and Cons of Buying a Newly Built Home
The 10 Most Costly Home Selling Mistakes – & How To Avoid Them

Michael Corbett is Trulia‘s real estate and lifestyle expert. He hosts NBC’s EXTRA’s Mansions and Millionaires and has authored three books on real estate, including Before You Buy!

MONEY First-Time Dad

Why I’ll Send My Infant Son to College Before I Buy a House

061416_FF_Luke_1
Luke Tepper Taylor Tepper

With housing so expensive, I figure my young family will be renting for foreseeable future. The latest on being a new dad, a Millennial, and (pretty) broke.

Mrs. Tepper and I are 28 years old, and our son is four months. Over the past year, Luke has acquired an $800 stroller, a $250 crib, and a $50 humidifier. (Before you make fun, understand that he constantly bore a stuffy morning nose, and what kind of monster wouldn’t spend a measly $50 to help his only son sleep soundly?!)

We’ve begun funding Luke’s New York 529 college savings account in order to spot his entire higher education bill (provided he goes to a state school), and we, of course, will pay his medical expenses for the next 26 years.

But there is one thing that we will not buy him—a house. In all likelihood (which means unless we win the lottery, or someone gives us a hundred thousand dollars), we will put our son through college before we buy our family a home.

Which, when you think about it, is strange. Last year we earned almost $110,000 and that will (hopefully) increase rapidly as we enter our career primes. We hardly travel (much to our chagrin) and have a reasonable $300 monthly car payment. Mrs. Tepper really only shops for (baby) clothes on sale, online, or both, and my main indulgence is a bimonthly $45 bottle of Templeton rye whiskey.

Why then will we be renters, at least until we’re in our fifties?

Reason #1: It’s (Really) Hard to Save

We live in a two-bedroom apartment in Brooklyn with cheap wood cabinets and a kind of white plaster countertop that stains as easily as a peach bruises. In the afternoon it often takes five minutes for the water to go from warm to hot. We don’t have a washing machine—neither does our building, which was built during the Hoover administration—and I do our dishes by hand because we don’t have a dishwasher.

Next year our rent will be $2,020 (and that doesn’t include gas, electricity, cable, Internet, or whiskey).

Eventually we’ll decamp for the ‘burbs for the sake of space and sanity, but with that move comes higher mass transit costs (an $1,800 yearly increase) and more house to heat and furnish and maintain.

The Dave Ramsey in me says I should find more ways to cut spending: no more occasional brunches or flights to Florida. (Luke can meet his grandparents on Skype!) But those hypothetical savings are peanuts in the grand scheme of things, and the me that wants to stay married shuts Dave Ramsey up.

Read: Half of Millennials Will Ask Mom and Dad to Help Them Buy a Home

Reason #2: Student Loans

In order to gain our cushy, 50-hour-a-week jobs, both Mrs. Tepper and I attended (public) graduate school. That came on top of studying at New York University for four years and (seemingly) $550,000,000.

So we have loans. Lots of them. (I alone owe almost $60,000.) Obviously we are not the only ones tied up in the web of student loan bills. People like me now owe almost $1.1 trillion, according to the Federal Reserve Bank of New York, or about twice as much as in 2008, when my wife and I graduated college.

I’m now paying $350 a month—and that’s mostly interest.

Reason #3: Houses Are Expensive

In New York City, the median home price is $369,000, and that comes with a median down payment of $74,000, per a recent Redfin report. In Nassau County, which is out on Long Island, you need to put $88,000 down.

Needless to say, we don’t have that kind of money, nor will we anytime soon.

And that–expensive rent, student loans, and homes—doesn’t even take into account the $1,500 a month gorilla in the room (child care) or, you know, Christmas presents.

Look, there are worse things than not buying a house (like not having a job or being a Dallas Cowboys fan.) We have a happy, healthy family, with sunny days ahead, and maybe we’ll find a way to save a buck or two over the years.

But not that long ago, it took only one middle class job in the family to afford a home. Now, according to the Redfin report and my life, two doesn’t cut it. When the prospect of owning the roof over your family’s head is so far gone, is it really that crazy to buy a $50 humidifier for your son?

MORE: Why Does My One Baby Need Two of Everything?

MORE: How Can Child Care Cost as Much as Rent?

 

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