Nearly a Third of Hispanic Millennials Provide Support to Two or More Generations
Millennial Women Face a Significant Wage and Savings Gap
Nearly two-thirds (64%) of working millennials
say they will never accumulate $1 million in savings over their
lifetime, according to the Wells Fargo Millennial Study. Six in ten
millennials (59%) have started saving
for retirement, whereas 41% have not. Of the millennials who are not
saving for retirement, 64% say they are “not making enough money to save
for retirement.”
The Wells Fargo Millennial study was conducted by GfK and surveyed over
1,000 U.S. adults between the ages of 22 and 35, with an additional
oversample of 500 Hispanic millennials for comparison purposes.
“Saving $1 million is often noted as a nest-egg target to help fund a
multi-decade retirement, so we wanted to find out if today’s millennials
think they can get there. A majority don’t think so. Millennials may not
realize that if they start saving consistently by their mid-twenties —
and stay invested for the duration of their working years — they
will likely accumulate $1 million by the time they retire,” said Joe
Ready, director of Institutional Retirement and Trust for Wells Fargo.
The Savings Math
A millennial that earns a starting salary of $32,000 at age 25, saves 5%
the first year and then increases their savings rate by 2% each
year (up to 13%) could accumulate $1 million by age 65. This assumes the
earner receives a 2% salary increase annually, is invested in the market
and realizes a 7% return on their invested assets. “Making the math work
to accumulate
savings means that millennials must start saving early in their
working lives. Millennials have the power of time on their side and need
to embrace it. They can get started by reducing
discretionary spending by $26 each week and directing that savings
to their 401(k) plan, starting at age 25 — it’s feasible,” added Ready.
According to the study, the nearly two-thirds of millennials who say
they will not be able to accumulate $1 million report a median personal
income of $27,900. Fifty percent of those have started saving for
retirement. Of the millennials who say they won’t be able to save $1
million but have started saving for retirement, nearly four in ten (37%)
are putting away more than 5% of their income, and 7% are putting away
more than 10%.
“Almost half of the group who don’t think they can reach $1 million have
already started saving; this group is on the right track in terms of
already developing strong savings habits. The path to creating a
sizeable nest egg is more achievable than many millennials might
realize,” said Ready.
Of the 32% who do expect to save $1 million, the median annual
personal income reported by this group is $53,000. Seventy-seven percent
have started saving for retirement. Two-thirds of those are deferring
more than 5% of their income, and 28% are putting away more than 10%.
One Third of Millennials Have Student Loan Debt, Are Not Employed in
Preferred Career
According to the study, 34% of millennials have student loan debt, with
a median debt load of $19,978. For those who have debt, 75% say their
student loan debt is “unmanageable.” Yet, of this group, 70% are still
saving for retirement, at an average savings rate of 5.5%.
Millennials tend to value jobs they “love” more than ones with high
income or strong benefits. The study found that fewer than half of
millennials are fully employed in their preferred career.
-
63% of millennials say that having a job they love is more important
than a high income and many benefits.
-
44% of millennials describe themselves as “fully employed in their
preferred career.” A little more than half (54%) of 30- to
35-year-olds are fully employed in their preferred career, as compared
to 36% of those in their twenties. Thirty-two percent are fully
employed but not in their preferred career.
-
Millennials have worked, on average, for 4.8 employers, but 40% say
they would like to work for one employer their whole career.
Millennial Women Face Financial Struggle
According to the study, there are significant differences in the
earnings and financial outlook of millennial men and women.
|
|
|
|
|
|
|
|
|
|
Men
|
|
|
Women
|
Median personal income:
|
|
|
$39,100
|
|
|
$28,800
|
Report living paycheck to paycheck:
|
|
|
43%
|
|
|
54%
|
Finances stretched “too thin” to save for retirement:
|
|
|
50%
|
|
|
61%
|
Don’t believe they can accumulate $1 million in savings:
|
|
|
56%
|
|
|
73%
|
Have already started saving for retirement:
|
|
|
61%
|
|
|
56%
|
Average percentage of income saved:
|
|
|
7.3%
|
|
|
5.7%
|
|
|
|
|
|
|
|
“The wage gap between male and female millennials clearly exists, and
it’s a real issue. It’s important that younger women focus on saving and
investing now, as this strategy will help put them in good standing for
their retirement years,” said Ready.
Hispanic Millennials Focused on Finances
About a quarter of the nation’s Hispanic population are millennials*,
and there are key differences between the way Hispanic millennials and
general-population millennials perceive and make decisions about their
finances. One of the more profound differences between these two groups
is the extent to which Hispanic millennials provide financial support
for extended family. Nearly a third (30%) of Hispanic millennials say
they are currently providing financial support to two or more
generations of their family, versus 14% of general-population
millennials. Despite this difference, Hispanic millennials are more
optimistic about surpassing the lifestyle of their parents, with 63%
saying they will “do better than their parents,” in comparison to 49% of
general-population millennials.
Hispanic millennials report a median personal income of $31,100, which
is slightly less than the $33,800 reported by the general population. In
addition, for Hispanic millennials who report having student loan debt,
the median debt amount is $10,267, which is less than the median
reported by general-population millennials ($19,978).
Hispanic millennials are concentrating on their present-day finances at
a higher rate than the general population: 66% of Hispanic millennials
attest to having a monthly budget,
versus 54% of the general population. However, when it comes to saving
for retirement, Hispanic millennials are doing so at a rate of 52%,
versus the general population of 59%. That said, greater percentages of
Hispanic millennials – 42% – consider saving for retirement a “high
priority,” versus 35% of the general population.
Millennials and Financial Health
More than eight in 10 millennials (85%) say that saving for retirement
is an important part of becoming a “financial adult,” and 82% say that
seeing people who are comfortably retired today makes them want to save
more for their own retirement. At the same time, less than half (45%)
have “an established routine” for reviewing their finances and a little
more than half – 54% – say they have a budget.
Of the 46% who do not have a monthly budget, 37% say they don’t need
one, and 33% say it’s not a priority.
Six in ten millennials (59%) say the current economic climate makes them
uncomfortable about investing
their money. More than half (52%) of today’s millennials say the
volatility of the stock market makes them worry they will “lose their
retirement savings in the market.”
“The fact that half of millennials have a fear of losing their savings
in the market concerns me because being invested in the market at this
age is only going to benefit this generation for the future. The market
has continued to generate returns for the long-term investor, and it is
absolutely critical that younger people recognize this,” said Ready.
Millennials and Retirement
Millennials would like to retire at an average age of 59, far earlier
than 65. Other key facts about retirement:
-
Millennials who have started saving for retirement say the average age
at which people should start saving is 23.
-
Millennials who are not saving yet say the average age they will start
saving is 32.
-
74% of millennials do not think that Social Security will be available
for them at retirement.
-
69% of millennials think that having a retirement plan such as a
401(k) is extremely or very important, but only half (52%) have such a
plan.
-
Of those who have started saving for retirement, 69% are currently
saving in an employer-sponsored plan such as a 401(k)-type plan.
-
Millennials who have a workplace retirement plan began contributing to
the plan at an average age of 24.
Savings rates
For those who have started to save for retirement, a plurality – 44% –
report they are saving 1% to 5% of their income, 33% are saving 6% to
10% of their income, and 6% are saving 11% to 14%. When asked what the
biggest trigger was for starting to save for retirement, 21% said they
know that if they start to save early they’ll have more money when they
retire; 18% say they were motivated to start saving by the employer
match. Among millennials who have started saving for retirement, 17% say
they have taken funds out of their retirement account for purposes other
than rolling over to a new account.
401(k) plans and the role of advice:
-
73% of millennials support auto-enrollment in 401(k) plans, but less
than a third (29%) are offered that option.
-
71% of millennials say they would value a financial
coach to help them understand the complexities of their retirement
plan.
-
16% of millennials say they are “extremely” or “very” interested in
using a digital advisory service for financial
planning.
-
24% say they are “extremely” or “very” interested in using a gamified
app for financial planning or advice.
See also: Eye-opener:
The cost of waiting to save for retirement on Wells Fargo
Stories.
A Path to Accumulating $1 Million in Savings for Today’s Millennials:
Scenario: $32,000 salary
|
Begin saving at age 25 (Retirement age = 65) Initial deferral
rate: 5% Annual increase: 2% (caps at 13%) Annual pay
increase: 2%
Assumed annual rate of return on investments: 7%
Account balance at retirement: $1,045,056**
|
Year 1:
Salary: $32,000 Deferral rate: 5% Annual 401(k) pre-tax
savings: $1,600 Reduction in take-home pay: $1,360 Weekly
reduction in take-home pay: $26.15
|
Year 5:
Salary: $35,311 Deferral rate: 13% Annual 401(k) pre-tax
savings: $4,590 Reduction in take-home pay: $3,901 Weekly
reduction in take-home pay: $75.04
|
Year 10:
Salary: $39,008 Deferral rate: 13% Annual 401(k) pre-tax
savings: $5,071 Reduction in take-home pay: $4,310 Weekly
reduction in take-home pay: $82.89
|
*Statistic based on Pew
Research Center analysis of U.S. Census Bureau data
** Savings calculations performed by Wells Fargo Institutional
Retirement and Trust. The calculations made are not guaranteed and are
not projections of actual results. The retirement savings amount assumes
that the annual contributions and payroll deduction will continue each
year until retirement. A regular investment program neither provides
assurance of making a profit nor guarantees against loss in a declining
market. The calculations do not guarantee results under any savings or
investing program and cannot guarantee that you will meet your
retirement savings goal. For more detailed information that takes into
account your individual situation, please consult your tax, legal, or
financial advisor.
About the Survey
The 2016 Millennial Study was conducted online between April 11 and
April 26, 2016, by GfK on behalf of Wells Fargo’s Wealth and Investment
Management (WIM) Market Research Center. Survey respondents included
1,005 “general population” Millennials ages 22-35. Participants needed
to be employed (not in the financial services/banking industry) and a
U.S. resident for at least three years. For comparison purposes, 504
Hispanic Millennials were also surveyed. Data were weighted based on a
variety of demographic and other factors to ensure accurate
representation of the sample.
About Wells Fargo
Wells Fargo & Company (NYSE:WFC) is a diversified, community-based
financial services company with $1.9 trillion in assets. Founded in 1852
and headquartered in San Francisco, Wells Fargo provides banking,
insurance, investments, mortgage, and consumer and commercial finance
through more than 8,600 locations, 13,000 ATMs, the internet
(wellsfargo.com) and mobile banking, and has offices in 36 countries and
territories to support customers who conduct business in the global
economy. With approximately 268,000 team members, Wells Fargo serves one
in three households in the United States. Wells Fargo & Company was
ranked No. 27 on Fortune’s 2016 rankings of America’s largest
corporations. Wells Fargo’s vision is to satisfy our customers’
financial needs and help them succeed financially. Wells Fargo
perspectives are also available at Wells
Fargo Blogs and Wells
Fargo Stories.
About GfK
GfK is the trusted source of relevant market and consumer information
that enables its clients to make smarter decisions. More than 13,000
market research experts combine their passion with GfK’s long-standing
data science experience. This allows GfK to deliver vital global
insights matched with local market intelligence from more than 100
countries. By using innovative technologies and data sciences, GfK turns
big data into smart data, enabling its clients to improve their
competitive edge and enrich consumers’ experiences and choices.
For more information, please visit www.GfK.com
or follow GfK on Twitter: https://twitter.com/GfK.