Why Retirement Is Becoming Unattainable for Younger Generations — Summary

Q: The Broken Retirement Promise

- The classic story—study hard, get a good job, save, and enjoy a comfortable retirement—no longer matches reality for most Americans. - Recent reports show **less than 30%** of U.S. workers are on track to retire, and an even smaller share expect a comfortable retirement. - The COVID‑19 pandemic widened the gap between younger workers (who have fewer assets and more precarious jobs) and older, more secure generations.

Q: Housing Crisis: The Biggest Financial Drag

- Homeownership remains the single largest personal asset for most people, providing equity, reduced rent costs, and a safety net in retirement. - Median age of first‑time homebuyers in 2019 was **34**, and the pandemic is pushing it higher. - High‑cost cities (NYC, Chicago, San Francisco) force even high‑income earners into expensive markets, while many 18‑30‑year‑olds still live with parents. - Most young buyers can only afford apartments or townhouses, not single‑family homes, limiting long‑term equity growth. - A 30‑year mortgage taken at age 34 means many will still be paying it into their mid‑60s, reducing retirement cash flow. - Without a paid‑off home, retirees must allocate savings to rent or cannot downsize, further straining finances.

Q: Stock Market and Asset Inflation

- Stocks are the primary vehicle for retirement savings, but the assumption of “endless returns” is eroding. - Historical S&P 500 price‑to‑earnings (P/E) ratio averages ~15×; today it sits just under 50×, the second‑highest ever. - Higher P/E means you must invest **three times** as much capital to achieve the same future income. - Non‑productive assets (gold, Bitcoin, collectibles) and even real estate (when bought for speculation) divert money away from productive, dividend‑generating investments. - Over‑inflated asset prices make it unrealistic for average workers to accumulate enough shares to fund retirement.

Q: Diminishing Returns on Capital Investment

- Early productivity gains came from simple capital upgrades (e.g., a table saw for lumberjacks) that allowed workers to retire early. - As more firms automate, each additional investment yields smaller marginal gains and requires ever‑larger capital outlays. - Eventually, fully automated production still needs human oversight, and the cost of replacing labor with machines becomes prohibitive. - This slowdown reduces the overall growth rate of the economy and the returns available to retirement investors.

Q: Six Economic Headwinds (Robert J. Gordon)

1. **Loss of the Demographic Dividend** – The boom of women entering the workforce has plateaued; future growth will require older workers to stay employed longer. 2. **Declining Educational Attainment** – Higher education is becoming more expensive and less aligned with job market needs, reducing human capital productivity. 3. **Rising Inequality** – Income growth is concentrated in the top 1%; the remaining 99% see only ~0.75% real wage growth, often below inflation. 4. **Globalisation Pressures** – While global wages converge, high‑income nations lose relative wage advantage, squeezing domestic earnings. 5. **Energy & Environmental Constraints** – Fossil‑fuel‑driven growth is unsustainable; climate regulations and resource limits will curb industrial output. 6. **Mounting Debt** – Household, corporate, and government debt levels are rising, forcing future cutbacks in spending—including retirement contributions.

How Money Works

Jan 12, 2026

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4 min read

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Channel: How Money Works

Why Retirement Is Becoming Unattainable for Younger Generations

The Broken Retirement Promise

The classic story—study hard, get a good job, save, and enjoy a comfortable retirement—no longer matches reality for most Americans.
Recent reports show less than 30% of U.S. workers are on track to retire, and an even smaller share expect a comfortable retirement.
The COVID‑19 pandemic widened the gap between younger workers (who have fewer assets and more precarious jobs) and older, more secure generations.

Housing Crisis: The Biggest Financial Drag

Homeownership remains the single largest personal asset for most people, providing equity, reduced rent costs, and a safety net in retirement.
Median age of first‑time homebuyers in 2019 was 34, and the pandemic is pushing it higher.
High‑cost cities (NYC, Chicago, San Francisco) force even high‑income earners into expensive markets, while many 18‑30‑year‑olds still live with parents.
Most young buyers can only afford apartments or townhouses, not single‑family homes, limiting long‑term equity growth.
A 30‑year mortgage taken at age 34 means many will still be paying it into their mid‑60s, reducing retirement cash flow.
Without a paid‑off home, retirees must allocate savings to rent or cannot downsize, further straining finances.

Stock Market and Asset Inflation

Stocks are the primary vehicle for retirement savings, but the assumption of “endless returns” is eroding.
Historical S&P 500 price‑to‑earnings (P/E) ratio averages ~15×; today it sits just under 50×, the second‑highest ever.
Higher P/E means you must invest three times as much capital to achieve the same future income.
Non‑productive assets (gold, Bitcoin, collectibles) and even real estate (when bought for speculation) divert money away from productive, dividend‑generating investments.
Over‑inflated asset prices make it unrealistic for average workers to accumulate enough shares to fund retirement.

Diminishing Returns on Capital Investment

Early productivity gains came from simple capital upgrades (e.g., a table saw for lumberjacks) that allowed workers to retire early.
As more firms automate, each additional investment yields smaller marginal gains and requires ever‑larger capital outlays.
Eventually, fully automated production still needs human oversight, and the cost of replacing labor with machines becomes prohibitive.
This slowdown reduces the overall growth rate of the economy and the returns available to retirement investors.

Six Economic Headwinds (Robert J. Gordon)

Loss of the Demographic Dividend – The boom of women entering the workforce has plateaued; future growth will require older workers to stay employed longer.
Declining Educational Attainment – Higher education is becoming more expensive and less aligned with job market needs, reducing human capital productivity.
Rising Inequality – Income growth is concentrated in the top 1%; the remaining 99% see only ~0.75% real wage growth, often below inflation.
Globalisation Pressures – While global wages converge, high‑income nations lose relative wage advantage, squeezing domestic earnings.
Energy & Environmental Constraints – Fossil‑fuel‑driven growth is unsustainable; climate regulations and resource limits will curb industrial output.
Mounting Debt – Household, corporate, and government debt levels are rising, forcing future cutbacks in spending—including retirement contributions.

Implications for the Future Workforce

Combined, these forces suggest many will need to work well beyond traditional retirement ages—potentially into their 80s or even 100s.
Traditional retirement planning (401(k), modest home equity, stock market exposure) may no longer be sufficient.
Individuals must diversify financial knowledge, consider alternative income streams, and prepare for a longer earning horizon.

What You Can Do Now

Educate yourself about how money, assets, and the economy interact.
Prioritise productive investments that generate cash flow (e.g., dividend‑paying stocks, income‑producing real estate) over purely speculative assets.
Plan for a later retirement by building flexible savings strategies and reducing debt early.
Stay adaptable: monitor economic trends, be ready to upskill, and consider side‑income opportunities that are less vulnerable to automation.

Understanding these dynamics is essential; otherwise you’ll be forced to stay in the grind far longer than you imagined.

The traditional retirement dream is fading because housing unaffordability, over‑inflated asset markets, and deep‑seated economic headwinds are forcing younger generations to work much longer—potentially into their 80s or beyond. To avoid a lifetime of grind, you must understand how money truly works, focus on productive, income‑generating investments, and plan for a significantly extended working life.

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Key Points

The classic story—study hard, get a good job, save, and enjoy a comfortable retirement—no longer matches reality for most Americans.
Recent reports show less than 30% of U.S. workers are on track to retire, and an even smaller share expect a comfortable retirement.

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Full Transcript

You pay attention at school, you study hard,
get a good job, work diligently throughout
your career all so that one day you can kick
back and enjoy a nice pleasant retirement.
That’s the story anyway.
But it’s not one that always lives up to
reality.
There are countless stories of people with
good jobs, and diligent savings patterns still
needing to work well into their twilight years.
This is to say nothing of people that unfortunately
never have the privileges of higher education
or a stable career.
Recent reports have found that less than 30%
of American workers are on track to retire
at all, and even fewer think they will have
a comfortable retirement and they might be
right.
I know you didn’t want to hear this, but
there are a few BIG factors at play in the
world today that are going to act to keep
most younger generations in the workforce
indefinitely.
This is all before considering the major hiccup
that the covid 19 pandemic has been.
A global event that has actually worked to
widen the gap between younger generations
with fewer assets and more precarious employment,
versus older generations which tend to be
more secure.
Now you might think you are different, you
contribute to your 401k, save diligently,
subscribe to How Money Works and even invest
regularly into the stock market.
Well that’s all great, but I might still
have some bad news for you.
There are lot’s of issues at play here…
Housing, the stock market and a series of
broader economic conditions which might threaten
the general assumptions we make about indefinite
growth.
So it’s time to learn how money work’s
to find out why we will all be on that grind
until we are 120 years old.
So the obvious first culprit is housing.
Affording a home has become a major challenge
for most workers in the USA.
I know this problem is nothing new, but there
ARE still a few very important factors that
people don’t consider.
Even very high-income earners that graduate
top universities and go into fields like banking
or big tech tend to be moving to equally high
cost of living areas like New York, Chicago,
or San Francisco.
Pew research recently reported that a majority
of young adults between the ages of 18 and
30 are now living at home with their parents.
The median age of a first home buyer in 2019
was a 34 and experts agree it’s almost inevitable
that figure will be pushed even higher by
the pandemic.
What’s more is that young buyers tend to
be purchasing smaller dwellings like apartments
and townhouses rather than traditional free
standing family homes.
Not because they don’t want to, but because
they can’t afford it.
This is a real issue because as most financially
secure people will tell you their house is
their biggest asset.
This doesn’t just mean it’s the asset
that they own that’s worth the most money
either.
Owning a house means that you don’t have
rental expenses and even if you are paying
a mortgage those payments will at least partially
be building equity in the home itself.
What’s more is that once that mortgage is
paid off you have somewhere to live with very
little ongoing costs.
Retiring with a home, means that even modest
retirement savings or a pension can go a very
long way when compared to someone who will
need to stretch those payments to cover rent.
If a homeowner is running low on cash in retirement
it could be a simple as downsizing their family
home, a luxury not possible for someone who
hasn’t fully paid off their home, or doesn’t
own one at all.
Now let’s be generous and take this median
age of 34 to buy a first home, stick a 30
year mortgage on top of it, and suddenly even
this generous assumption of a regular young
worker is in their mid 60’s still paying
off a home loan.
This is assuming that this person never upgrades
their home, or renovates, or does anything
to increase their mortgage from the original
one they take out over thirty years.
The particularly morbid amongst you might
think, well the boomers have to die and leave
us their homes eventually right?
And… well… yeah I guess so as unpleasant
as that may be it is a reality.
The problem is this will likely only exarcerbate
the issue.
We saw this in our video on why family fortunes
disappear, inheritance’s that could actually
fund a retirement tend to go to people that
are already pretty old and wealthy themselves.
Now again the unaffordable housing issue is
a debate as old as modern capitalism, but
maybe this isn’t an issue anyway, maybe
you are still unconcerned because you have
plans to fun your retirement even without
a house to call you own, well ok, let’s
put those plans to the test…
The stock market is the other major vehicle
by witch people fund their retirment.
Even fixed income pension funds ultimately
rely on the growth of these markets to provide
incomes to their members in retirement, but
this assumption of endless returns may be
under threat.
To understand why consider a simple example.
10 lumberjacks are working at a sawmill that
creates frames for residential homes.
At the moment the lumberjacks are only using
basic hand tools, but if they all work hard
and nobody slacks off they will meet their
quotas.
One particularly astute lumberjack takes a
portion of his paycheque and over time uses
it to fund research into motorized tool’s.
His money was well spent because he eventually
invents the table saw.
He then saves up a bit more of his money to
buy the materials needed to built 9 copies
of his new contraption.
He then gives these 9 table saws to his colleagues
who had previously been using those hand tools.
This boosts their productivity enough that
they can still meet their quota even if the
first lumberjack doesn’t show up to work
at all.
This is what we call capital investment, and
it’s how (at least in theory) we can sustainably
fund peoples retirements.
The same amount of frames are made, the other
9 lumberjacks don’t need to work longer
and harder, and the first lumberjack has been
properly rewarded for his creation with a
nice cushy retirement.
Of course this is a very crude example but
in reality most people do the same thing just
through the medium of the stock market.
Companies raise money and then use that money
to purchase capital equipment which will allow
their worker to effectively and efficiently
produce goods and services for the economy.
But lets go back to our oversimplified example.
Problems start to arise when more of these
lumberjacks get the same bright idea.
One might invest into a forklift to make the
work of nine men possible with just eight,
and then another might do the same with nail
guns to make the work of the remaining 8 men
possible with just seven and so and so on…
But every time this happens it get’s a fair
bit harder to find that next thing.
Eventually you are going to need an almost
fully automated production line and even then
you are probably going to want at least one
worker there to oversea this operation.
Every human you take out of the equation and
replace with a piece of capital becomes more
and more expensive, especially when compared
to some other alternative investments.
Let’s say lumberjack 5 will need to invest
Millions of dollars into a robotic arm in
order to effectively retire while still ensuring
the quota of the lumbermill is met.
He might just say it, what I’ll do instead
is just buy the factory and require the remaining
four workers to work an extra 10 hours a week
to pick up my slack while I go and retire.
Now this guy sounds like an____, but just
think, how many hours a week are you working
in your job just to cover your rent?
This investment into non productive assets
(as in assets that don’t actually assist
in adding value) is a major hurdle.
Now the classic example of a non-productive
asset is something like gold, bitcoins, pokemon
cards and of course real estate.
Now real estate is weird because unlike these
other non-productive assets it does produce
income without needing to be sold.
It does this through rent.
Investing into real estate has been a particularly
attractive investment for a lot of people
which does two things, it increases the price
of real estate, causing more of this issue
we saw in the first part of this video, but
it takes away from investments into the types
of productive assets that CAN sustainably
fund retirements.
There is one other problem beyond this as
well… the overinflation of ALL asset markets.
Let’s look at our original example of those
table saws.
They were machines that made cut up pieces
of wood, lets say they can chop up 20 pieces
each a day.
Now let’s replace those table saws with
shares, these are effectively machines for
making money in the form of dividends.
Lets say each share makes 20 dollars a day.
In both examples the lumberjack would need
to own 9 of each to be able to fund their
retirement, 180 pieces of wood would replace
their job at the lumber mill, and 180 dollars
a day would replace their income, so either
works just fine.
Now counterintuitively problems arise when
these assets become more expensive.
Most people think stocks getting more expensive
is a good thing, and it is … for the people
that already own them…
Imagine each share was trading for $10,000…
Saving up $90,000 is a pretty tall order for
a lumberjack on $180 per day but it is certainly
possible over a working career.
Now imagine those same shares were trading
for $100,000 while still paying the same $20
daily dividend.
If you already owned these shares you would
be feeling great because your on paper net
worth has grown handsomely, but our lumberjack
now has to buy $900,000 worth of shares to
fund his retirement, which is just no realistically
possible within his working career.
Now this might sound like a farfetched example
but it isn’t! it’s exactly what is happening
today.
To see this let’s look at the price to earning’s
ratio of the s&p 500 (a collection of the
500 largest public companies in America).
Historically it has hovered around a multiple
of 15, this means that on average it would
take the earning on these shares 15 years
to pay for the share itself.
Today, that multiple is sitting just under
50 years, which is the second highest it’s
been in history, falling only behind late
2008, which as you all know was a time of
widespread economic prosperity
In plain English this means people are going
to either need to invest 3 times as much to
fund their retirement’s ooorrrr rely on
the next biggest idiot to buy their shares
off them in retirement for a 100 times multiple,
200 times multiple, 1,000 time multiple…
which BTW certain investor are already doing
for some stocks.
Now you might say, oh well shares aren’t
like table saws with fixed outputs.
These dividends can and likely will increase
in the future, right?
And sure, that’s almost guaranteed, buuuuttt
it’s still unlikely we will ever see widespread
PE ratio’s under 20 again for 2 reasons.
1. if a company DOES start paying out a consistently
high dividend relative to it’s market price,
well then investors will buy it which will
push up the price, meaning that it won’t
a great deal anymore.
Market forces are a bitch.
The second reason is a bit more complicated,
but it’s one that has some leading economists
genuinely concerned…
Robert J Gordan is an American economist who
published this paper with the National Bureau
of Economic Research.
Is US Economic Growth Over?
Faltering Innovation Confronts The Six Headwinds.
It’s a fantastic paper that is surprisingly
readable even to people without a strong economic
background.
But spoiler alert, Gordon basically argues
that the past 200 years of innovation and
economic growth were more or a exception rather
than the rule that we should continue to expect
indefinitely into the future.
Limitless growth in a finite world… you
do the maths.
Gordon basically argues that this generation
is the 5th lumberjack, all the easy innovations
that drastically improve productivity have
already been made, and even gradual improvements
from here on out will either be very expensive,
or just rent seeking in nature.
Working more to shift value around in new
and creative way’s more so than working
to actually create any.
If this rather bleak outlook wasn’t enough
Gordan argued that this would coincide with
what he described as the 6 economic headwinds.
These are forces that will act to slow growth
in economies around the world for at least
the next 100 years.
These headwinds are,
The loss of the demographic dividend – Basically
the economy saw a huge boost when women started
to move into the workforce between the 1960’s
and the 1990’s.
Now most women in developed countries work
a professional career similar to their male
counterparts but that’s just the status
quo now.
We aren’t ever going to be able to double
the workforce again, unless well… you know…
we make people work later and later in their
lives.
The second headwind is the loss in educational
attainment particularly in the USA.
Education is becoming more expensive, less
comprehensive and increasingly irrelevant
to the requirements of the modern work force.
A 3 year degree simply does not mean as much
as it did 50 years ago, not to an individual
or to the economy as a whole.
The third headwind is rising inequality, a
touchy subject at the best of times, but Gordan
was surprisingly pragmatic about his approach
to the issue.
The paper noted that incomes were on average
increasing by around 1.3 percent per year.
But that growth was heavily focused in the
top 1%, the remaining 99 percent only actually
saw income growth of around 0.75% year over
year.
Not even enough to keep up with inflation.
That means that if this trend continues it
will be inevitable that larger and larger
pools of workers simply won’t have the financial
means to save for retirement.
However if you are in the top 1% congratulations,
you can say nananana your video title is wrong
in the comments section.
The fourth headwind is the impact of globalisation.
Now in theory globalisation should make everybody
wealthier, and on “average” it does, but
averages have outliers, and those outliers
in this case will be national workforces that
have historically enjoyed high incomes relative
to the rest of the world, like say say probably
YOU watching.
The other side of this equation is that it
should equalise global wages, meaning it is
great for people in countries that have typically
had low incomes compared to the global average,
oh and of course the business owners that
can profit from the pool’s of cheap labor
along the way.
The fifth headwind is energy and the environment.
The growth of the past century was driven
by fossil fuels.
A cheap, easily transportable incredibly efficient
source of energy that could power everything
from automobiles to jetliners.
But of course they are a finite resource that
have come at a cost.
This cost will now be paid by younger generations
either in the form of environmental regulations
that slow down industrial output, or from
complete environmental collapse that will
also slow down production.
The final headwind is debt.
Household debt, government debt, corporate
debt, it’s all been growing steadily over
the years and eventually this needs to be
paid back, this is ultimately going to result
in the requirement for more income or less
spending.
For the government producing more income is
easy, they just tax more, but for individuals
and businesses the only option they might
have is spending less.
If someone is already running on a tight budget
then those regular contributions to a retirement
account might be what ends up getting sacrificed.
Gordon did present a likely outcome to alleviate
this sixth issue for all parties, and you
might be able to guess what it is.
Yup, push back retirement ages…
Now if this has all been a bit bleak for you
and you still think you are going to make
millions overnight then good on you, I will
have to work harder at crushing your spirit
next time.
But until then you should learn what to do
with your overnight fortune by watching our
video on exactly what you should do if you
suddenly make a lot of money.
Of course step one will always be to like
and subscribe to keep on learning how money
works.

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