Why our most basic assumptions about retirement may not add up

To celebrate my father's 80th birthday, my family rented a lovely farmhouse in Tuscany and spent a week gorging ourselves on epic meals and fine Italian wines. It was a fitting cap to my father's already pretty great retirement.

As octogenarians, my parents have more disposable income than they've ever had. My dad spends his days reading up on theoretical physics, a topic that's always interested him, and learning foreign languages in preparation for the amazing vacations he and my mother take each year. Their jobs didn't make them rich — my father was a civil servant, and my mother still works as a university professor. But they were diligent about saving, and they got lucky with their timing: Their retirement accounts soared during a historic period of economic growth, and their house in the DC suburbs has quintupled in value since they bought it in 1984.

I had a wonderful time on the Italy trip, and I'm glad my parents are doing so well. But for me, it was bittersweet. I felt like I was catching a glimpse of an old age I'll never get to experience for myself.

As elder millennials, my husband and I have diligently followed the best practices for a secure retirement. We've been tucking away money since our early 20s. We bought our home in Brooklyn during the pandemic, just before interest rates shot up. Our financial planner says there's a 76% chance we'll wind up with enough money to retire the way my parents have — way better odds than those facing most Americans, about half of whom have no retirement savings at all.

So why am I so skeptical that I'll be able to retire in comfort? The reason is in the fine print.

The model used by our financial planner relies on a lot of assumptions. It assumes we've correctly estimated our expenses thirty years from now. It assumes the economy will continue to grow over the rest of my lifetime, just as it did for my boomer parents. It assumes that our investments will enjoy an average annual return of 7%. It assumes that half of our income in retirement will come from Social Security. It assumes that my husband and I will continue to save at our current rate, with no interruption to our jobs and no decrease in our salaries. And it assumes that the impacts of climate change won't wreak havoc on the economy, upend governments, and subject vast swaths of the planet to natural disasters and hellish heat waves.

It assumes, in other words, that all of the external factors that can affect retirement plans — the stock market, the housing market, the job market, the services and financial support provided by the government — will continue to grow and thrive, just as they have over the past half century.

And that, given the current state of the world, feels highly unlikely, to put it mildly. The chaos that is roiling almost every aspect of our lives — and calling into question our far-from-certain future — has thrown my generation into a state I've come to think of as Millennial Retirement Panic. If I'm counting on my 401(k) to fund my golden years, how do I retire during an apocalypse?

For me, it was the climate crisis — and how little we're factoring its long-term effects into our economic planning — that first triggered my retirement panic.

Back in 2018, the Intergovernmental Panel on Climate Change projected 2040 — the year I turn 60 — as the moment the world will likely warm by 1.5 degrees Celsius, the threshold at which the effects of global warming will become irreversibly catastrophic. The following summer, I caught a panel during London's Climate Week that shook me even more. Economists who advise major insurance companies and pension funds presented findings from a model about what climate change will do to the world economy. At the highest projected temperatures, they estimated, GDPs would plummet by 30% by 2080 in every country they modeled, including the United States.

After the panel, I asked one of the presenters, Willemijn Verdegaal, what I should do to prepare for retirement, assuming the Earth stays on its current warming trajectory. "In all honesty," she told me, "there's very little point in you saving anything anymore."

Others have echoed that pessimism. Günther Thallinger, the CEO of Allianz, one of the world's largest insurance companies, recently wrote on LinkedIn that without urgent action to curtail climate change, the insurance industry could collapse. If homes aren't insured, banks would stop issuing mortgages, and markets would go into free fall. "Capitalism as we know it ceases to be viable," Thallinger warned.

That scared the hell out of me. What's the point in planning for a retirement that may never happen?

We know, of course, that no economic model can fully account for all the unknowns about climate accurately enough to put a firm number on its financial impact. And if the world invests dramatically in reducing emissions, the economy could escape some of the most dire forecasts. But you don't have to believe in any single prediction to conclude that climate change will make retirement look way different for millennials than it has for boomers.

"Any number is false precision, false accuracy, or worse," Gernot Wagner, a climate economist at Columbia University, says. "What I know is, it is less certain that I'm going to have a stable retirement."

We millennials started off our adulthoods at a retirement disadvantage. While my parents and their friends benefited from one of the longest periods of economic growth in American history, my generation has experienced one upheaval after another. I graduated from college right into the dot-com bust. The Great Recession of 2008 came just as I finished graduate school. We're the best-educated generation, but that distinction means that many millennials are saddled with crushing student debt.

In 2019, a study by the Center for Retirement Research at Boston College found that millennials were "well behind" Gen Xers and baby boomers at the same point in their working lives. Millennials in their late 30s were three times more likely to be paying off student loans than boomers were at the same age, and twice more likely than Gen Xers. All told, millennials had accumulated about 15% less wealth than boomers — and 36% less than Gen Xers.

Millennials got a break during the pandemic, thanks partly to the Biden administration's pause on student loan payments. By 2022, the Center for Retirement Research found that millennials had not only caught up to the wealth trajectories of previous generations but had actually surpassed them.

But the reprieve was short-lived. Since taking office for the second time, Donald Trump has rescinded the Biden-era break on student loans. And the market plunge in early April brought back memories of the economic shocks we've experienced at earlier stages of our careers. "Another major downturn could vanish whatever progress we have made," Nilufer Gok, a coauthor of the Boston College report, says.

And recent events have called into question our retirement assumptions in ways that are even more alarming. Economists warn that Trump's tariffs could lead to a permanent realignment of the world economy, making daily life far more expensive. I worry that both my husband and I could see our wages fall as artificial intelligence devalues the kind of work we do. And Social Security, the cornerstone of America's retirement system, is projected to face a shortfall that will force benefit cuts unless Congress takes action before 2033. Millennials, having already lived through a staggering period of technological and economic change, now face the prospect of even greater upheaval in the decades to come.

As my Millennial Retirement Panic mounted, I asked my financial advisor — then in his 70s — what I could do to better prepare for an ominous future. "It doesn't make a lot of sense to live your life like there'll be a disaster at the end of it," he told me.

Other financial planners and climate forecasters offered me the same advice. There's not a whole lot that any of us can do as individuals to protect our finances from the kind of massive, macroeconomic shifts we're facing. "You can certainly create a hedge against risks within the portfolio composition, but that only goes so far," Jesse Keenan, a climate change researcher and professor at Tulane University, says. "It's very difficult, I think, to do it at an individual level."

I know they're right — but I also wanted to take some sort of action, to increase my chances of enjoying a secure and comfortable retirement in the face of looming disaster. When COVID-19 shut down New York, my husband and I decided to move to Michigan, a state we chose because scientists predict it would emerge relatively unscathed by warming temperatures.

Ironically, not long after we arrived, the neighborhood we selected as a safe haven from extreme weather was flooded by unusually heavy rains and was ultimately declared a federal disaster area. There wasn't much of a job market for me in Michigan, which sapped my earnings and made saving harder. I also didn't have a social network that could help me find a better job. We eventually returned to New York, feeling as helpless about old age as we did when we left.

So, where does that leave us? For now, we're staying on our retirement savings track as best we can, mainly because we don't know what else to do. Regardless of what the future brings, we know that any savings are better than none. But the more I think about retirement, the more convinced I am that our current assumptions about it are just plain wrong. The ways our parents built wealth for retirement may not work for us.

Whatever lies ahead, I know it won't help to panic. But we also need to be clear-eyed about the external risks to our individual retirement plans. Our investments and our homes and our jobs don't exist in a bubble — and the projections we make about them need to take into account all the external factors that threaten to disrupt them in all sorts of new and unprecedented ways. It's necessary to make assumptions about our retirement. But our old ones don't feel up to what's coming.

J. Lester Feder is a freelance writer based in Brooklyn.

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