Millennials & Money Data

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liamb86
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Millennials & Money Data

Post by liamb86 » Wed Oct 10, 2018 11:28 am

I read an article today in USA Today referencing some new data from Edelman regarding millennials with money.

At a high level, the study found that affluent millennials (1,500 respondents that have above $100k/year income or above $50k in investable assets):
- 52% have a six month emergency fund
- 45% max out annual 401k contributions
- 84% owned a home

As someone that falls into this peer group, my reaction (if the data is correct) is that maxing out retirement accounts each year may not be enough. If such a large group of my peers are also accumulating similarly, wouldn't inflation greatly reduce my purchasing power? Looking at US statistics by generation and income, I think it is safe to assume 20-30% of millennial have $50k in investable assets and would then meet one of the criteria in the data to be considered an "affluent millennial".

Should I consider this data as "corporate marketing " and take it with a grain of salt or is this something that should change my savings plans to be more aggressive?

Here is the full study: https://www.edelman.com/sites/default/f ... y_2018.pdf
USA Today Article: https://www.usatoday.com/story/money/20 ... 576511002/

Whakamole
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Re: Millennials & Money Data

Post by Whakamole » Wed Oct 10, 2018 11:32 am

liamb86 wrote:
Wed Oct 10, 2018 11:28 am
At a high level, the study found that affluent millennials (1,500 respondents that have above $100k/year income or above $50k in investable assets):
- 52% have a six month emergency fund
- 45% max out annual 401k contributions
- 84% owned a home
By only surveying affluent individuals, of course they're going to find that they have an emergency fund/maxing out a 401k/etc.

lukestuckenhymer
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Re: Millennials & Money Data

Post by lukestuckenhymer » Wed Oct 10, 2018 11:44 am

Are you asking if you should have $50k saved by your late 20s/early 30s? If you haven't, yes, be more aggressive.

magicrat
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Re: Millennials & Money Data

Post by magicrat » Wed Oct 10, 2018 11:58 am

I don't really understand what you're asking, but suggest that you ignore random surveys of affluent millennials and focus on your own planning. Do you have a plan? Does it make sense for you and can you stick to it? Are you saving what your plan requires to meet your goals?

Jack FFR1846
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Re: Millennials & Money Data

Post by Jack FFR1846 » Wed Oct 10, 2018 12:04 pm

Not everyone is like "us". I was talking with a coworker last week about our bonus being zero'd but the 401k match staying in place and he mentioned that he only contributes to get the full match (4% contribution to get 2% max match). He's upper 40's. Meanwhile, I do the full $24,500 and if am able to do Roths for wife and me (hit income phase out last year), that'll add another $13k.
Bogle: Smart Beta is stupid

liamb86
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Re: Millennials & Money Data

Post by liamb86 » Wed Oct 10, 2018 12:20 pm

DW and I do max our 401Ks, Roth IRA space, and contribute to 529s each year.

My question is - if our retirement plan of maxing these account each year becomes the standard plan used by 20%+ of my age group, is our plan going to work? Wouldn’t inflation eat away at our purchasing power if such a large group of people accumulate at this level each year for 20+ years?

Walkure
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Re: Millennials & Money Data

Post by Walkure » Wed Oct 10, 2018 12:29 pm

liamb86 wrote:
Wed Oct 10, 2018 11:28 am
I read an article today in USA Today referencing some new data from Edelman regarding millennials with money.

At a high level, the study found that affluent millennials (1,500 respondents that have above $100k/year income or above $50k in investable assets):
- 52% have a six month emergency fund
- 45% max out annual 401k contributions
- 84% owned a home

As someone that falls into this peer group, my reaction (if the data is correct) is that maxing out retirement accounts each year may not be enough. If such a large group of my peers are also accumulating similarly, wouldn't inflation greatly reduce my purchasing power? Looking at US statistics by generation and income, I think it is safe to assume 20-30% of millennial have $50k in investable assets and would then meet one of the criteria in the data to be considered an "affluent millennial".
There are many reasons to think that inflation may be higher going forward when we start talking multi-decade timeframes. The fact that less than half of the "affluent" millenials are maxing their 401(k)s isn't one of them. And even if such "prodigious" saving did have an impact, you would expect it to show up in the form of inflated asset pricing long before it started affecting the cost of living in retirement, so you'd be paying those inflated living costs with the proceeds from inflated assets. Make a plan for yourself and stick to it - the rest is noise.

mmmodem
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Re: Millennials & Money Data

Post by mmmodem » Wed Oct 10, 2018 12:29 pm

liamb86 wrote:
Wed Oct 10, 2018 11:28 am
I think it is safe to assume 20-30% of millennial have $50k in investable assets
Why would you assume this? According to the article below, most Americans don't have $500 to cover an emergency. I would be shocked if 20% of millennials or Gen Xers has $50k in investable assets.
http://money.cnn.com/2017/01/12/pf/amer ... index.html

Trimms
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Re: Millennials & Money Data

Post by Trimms » Wed Oct 10, 2018 12:32 pm

The premise/assumption behind your question is incorrect. Inflation isn’t caused by more people deciding to save and invest. Inflation is caused by money printing and an increase in the money supply. Look at Venezuela: they are not experiencing hyper inflation because Venezuelans decided to save more for retirement; their government is trying to finance everything by printing money.

I wouldn’t worry about young affluent people deciding to save more. Increased savings leads to more capital accumulation, which should lead to more economic growth.

HEDGEFUNDIE
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Re: Millennials & Money Data

Post by HEDGEFUNDIE » Wed Oct 10, 2018 12:43 pm

liamb86 wrote:
Wed Oct 10, 2018 12:20 pm
DW and I do max our 401Ks, Roth IRA space, and contribute to 529s each year.

My question is - if our retirement plan of maxing these account each year becomes the standard plan used by 20%+ of my age group, is our plan going to work? Wouldn’t inflation eat away at our purchasing power if such a large group of people accumulate at this level each year for 20+ years?
Your concern is unfounded. You're assuming that there will be more money chasing the same quantity of products and services. But high savings rates leads to high investment rates which leads to stronger future economic output which leads to more products and services produced. So the price level will increase, but at a normal moderate pace.

Also it's not like these are forces of nature that we have no control over. The Fed's whole job is to balance employment with inflation.

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jharkin
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Re: Millennials & Money Data

Post by jharkin » Wed Oct 10, 2018 1:07 pm

mmmodem wrote:
Wed Oct 10, 2018 12:29 pm
liamb86 wrote:
Wed Oct 10, 2018 11:28 am
I think it is safe to assume 20-30% of millennial have $50k in investable assets
Why would you assume this? According to the article below, most Americans don't have $500 to cover an emergency. I would be shocked if 20% of millennials or Gen Xers has $50k in investable assets.
http://money.cnn.com/2017/01/12/pf/amer ... index.html
Correct - every time these threads come up we need to remind ourselves that this website is a self selecting group of very above average investors.

DQYDJ has some nice tools that will spit out the information we seek:

Income:
https://dqydj.com/income-percentile-by-age-calculator/
An age 30 millennial making 100k is earning more income than 92% of their peers.

Assets:
https://dqydj.com/net-worth-by-age-calc ... ed-states/
Its hard to find statistics on "invetible assets" but if you use net worth excluding home equity as a proxy, Age 30-34 with $50k net worth is doing better than 72% of peers.


So I think the OP can breathe easy...


BTW as a relative 'old man' (Gen Xer) I can say all you folks in your 20s that are already making 6 figures and maxing your 401k... chill out and be happy. Many of us Xers where not able to do that until much later in age. Programmer jobs didn't pay 6 figures right out of college 20 years ago, plus many of us lived though both the DotCom and Great Recession wealth implosions.... Be glad for what you have....

hifive
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Re: Millennials & Money Data

Post by hifive » Wed Oct 10, 2018 1:55 pm

Thanks for sharing the article. I have some thoughts on the Edelman data that I haven't seen come up yet.

One of my friends did survey design for many years and he had quite a low opinion of typical online surveys. The fundamental issue is that it's really hard to get a good sample, and many places (including professional pollsters!) end up with big response bias issues. For example, how is the sample recruited? Are people self-selecting into the affluent or non-affluent category? Does the interpretation of how questions are worded differ between the two groups?

There are ways of adjusting results to try to correct for this stuff, but I didn't see anything in the Edelman publication talking about any such techniques. In fact, the picture-to-text ratio makes me think it's more of a fluff piece than a serious study. Sorry, that's my own bias getting out; I'll try to rein it in :-)

Since Edelman doesn't provide enough information to assess their methodology, the next best thing is to look at other sources as a sanity check. I'm glad jharkin already brought up DQYDJ's census data tools -- the 20-30% affluent millennials estimate seemed very optimistic to me and that tool appears to bear this out.

Another oddity: page 10 reports that 57%/47% of affluent/other millennials have achieved financial independence, but 52%/30% have a 6-month emergency fund, and 46%/24% have a financial plan? I'd really want to see how the questions were worded. Maybe "financial independence" here refers to economic outpatient care?!

As far as maximum 401(k) contributions go, here's some research from Vanguard: https://pressroom.vanguard.com/nonindex ... 062018.pdf. I didn't read the whole thing, but if you jump to page 43 there is data on how many people make maximum contributions by their demographics. They found that 40% of people with an individual income over $100,000 maxed out their 401(k) contributions. Does it seem credible that 45%/20% of all millennials with $100,000+ household incomes would also have maxed out their contributions?

Even if we take 20-30% (let's call it 25%) of millennials are affluent and 45%/20% max out 401(k) contributions at face value, the weighted percent maxing out their 401(k)s comes out to (25% * 45%) + (75% * 20%) = 26.25%. Vanguard found that 13% of all savers max out their contributions. Does 26% for millennials seem credible?

In conclusion, I question the study's generalizability to all millennials, and certainly wouldn't change my plans based on it!

warner25
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Re: Millennials & Money Data

Post by warner25 » Wed Oct 10, 2018 2:18 pm

I remember that Bill Bernstein wrote something that speaks to the OP's concern... http://www.efficientfrontier.com/ef/103/hell4.htm
If you want to retire early, what matters is not how much you save, but how much more than everyone else you save. In a world where everyone saves as if they’re going to retire at fifty-five, or even at sixty-five, none can.
But I'm both skeptical and unconcerned about this.

First, an income of $100k puts someone in the top 5-10% of all workers, from what I've read. So why be concerned about trying to outperform the top 5-10% in terms of savings? To ensure you're in the top 1%?

Second, I work with a bunch of people who all make about $100k, and I'm not sure I've ever met anyone, in person, who contributed the max to our retirement plan. Certainly not 45% of them.

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willthrill81
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Re: Millennials & Money Data

Post by willthrill81 » Wed Oct 10, 2018 3:15 pm

Just this morning, I went to www.tiaa.org/peercompare out of curiosity since they mailed me a flyer about it. While I have no idea where their data came from, they report that an average 30 year old making $100k only has $77k of current savings, is contributing 8% of their income toward retirement savings, and is forecasted to have $931,500 at retirement.

That doesn't describe me perfectly well, but let's just say that I'm above average. :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

delamer
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Re: Millennials & Money Data

Post by delamer » Wed Oct 10, 2018 3:18 pm

I would not assume that people understand what “maxing out 401(k) contributions” means.

Even on this forum, we occasionally get someone who thinks it means contributing enough to get the employer match.

kaeltor
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Re: Millennials & Money Data

Post by kaeltor » Wed Oct 10, 2018 3:25 pm

I mean, I am a millennial and had 50K in assets up until todays correction -- do i count?

hifive
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Re: Millennials & Money Data

Post by hifive » Wed Oct 10, 2018 4:52 pm

delamer wrote:
Wed Oct 10, 2018 3:18 pm
I would not assume that people understand what “maxing out 401(k) contributions” means.

Even on this forum, we occasionally get someone who thinks it means contributing enough to get the employer match.
+1. It strains credibility that millennials are twice as likely to contribute up to the IRS limit as the general population.

delamer
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Re: Millennials & Money Data

Post by delamer » Wed Oct 10, 2018 5:08 pm

hifive wrote:
Wed Oct 10, 2018 4:52 pm
delamer wrote:
Wed Oct 10, 2018 3:18 pm
I would not assume that people understand what “maxing out 401(k) contributions” means.

Even on this forum, we occasionally get someone who thinks it means contributing enough to get the employer match.
+1. It strains credibility that millennials are twice as likely to contribute up to the IRS limit as the general population.
Well, these are relatively affluent millennials.

But I still think 45% is too high.

Grt2bOutdoors
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Re: Millennials & Money Data

Post by Grt2bOutdoors » Wed Oct 10, 2018 5:13 pm

delamer wrote:
Wed Oct 10, 2018 3:18 pm
I would not assume that people understand what “maxing out 401(k) contributions” means.

Even on this forum, we occasionally get someone who thinks it means contributing enough to get the employer match.
Both younger and older colleagues of mine believe its contributing enough to get employer match. Our plan offers the ability to do Mega-Backdoor Roth, those who know about it and actually do it, I can count on two hands. Most of the management is not doing it. They are unable to grasp the significance of it. There are some rank and file utilizing it. Goes to show, how few actually understand personal finance.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: Millennials & Money Data

Post by Grt2bOutdoors » Wed Oct 10, 2018 5:15 pm

kaeltor wrote:
Wed Oct 10, 2018 3:25 pm
I mean, I am a millennial and had 50K in assets up until todays correction -- do i count?
Check back tomorrow. :wink:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

hifive
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Re: Millennials & Money Data

Post by hifive » Wed Oct 10, 2018 7:54 pm

delamer wrote:
Wed Oct 10, 2018 5:08 pm
hifive wrote:
Wed Oct 10, 2018 4:52 pm
delamer wrote:
Wed Oct 10, 2018 3:18 pm
I would not assume that people understand what “maxing out 401(k) contributions” means.

Even on this forum, we occasionally get someone who thinks it means contributing enough to get the employer match.
+1. It strains credibility that millennials are twice as likely to contribute up to the IRS limit as the general population.
Well, these are relatively affluent millennials.

But I still think 45% is too high.
Right. The Vanguard study I linked above found that 40% of $100K+ earners (individual income, not household) across all age ranges saved up to the IRS limit, and 13% overall. That this turns to 45%/20% (and that 45% based on joint income) in the Edelman study is fishy.

I think I'm questioning whether the survey results can really be extended to all millennials, and you're questioning whether the survey was answered correctly in the first place :sharebeer

youngpleb
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Re: Millennials & Money Data

Post by youngpleb » Wed Oct 10, 2018 8:56 pm

Speaking as a millennial, very few of my fellow millennial friends contribute to their retirement accounts. And of the ones who do, i think the majority has indicated they contribute enough to get the company match.
27. Always learning.

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willthrill81
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Re: Millennials & Money Data

Post by willthrill81 » Wed Oct 10, 2018 10:43 pm

There was a study done earlier this year which showed that a higher percentage of Millennials were contributing to their retirement than that of Baby Boomers.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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ReformedSpender
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Re: Millennials & Money Data

Post by ReformedSpender » Thu Oct 11, 2018 4:50 am

No one knows nothing

:beer
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

lazier_fan
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Re: Millennials & Money Data

Post by lazier_fan » Thu Oct 11, 2018 6:44 am

I share the skepticism noted by others that 45% of Affluent Millennials surveyed are maxing their 401ks. Here's the question the data come from:

Q17: How close are you to completing your personal goals? [Where 0% is no progress and 100% is where you’ve fully completed that goal, among
Affluent Millennials and Non-Affluent Millennials.]

I read the results as the average Affluent Millennial is contributing 45% of the $18.5k, or ~$8.3k. Others have a similar take? At the end of the day though, it's just another yardstick against which millennials will measure how they're doing. As I've seen mentioned a lot on these boards, the meaningful yardstick is how you're doing against your own goals.

taysic
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Re: Millennials & Money Data

Post by taysic » Thu Oct 11, 2018 1:11 pm

At a high level, the study found that affluent millennials (1,500 respondents that have above $100k/year income or above $50k in investable assets):
- 52% have a six month emergency fund
- 45% max out annual 401k contributions
- 84% owned a home
I am really skeptical about this as a millennial myself. Most affluent millennials making $100k+ live in expensive cities where it is hard to own a home on that income. If we are talking about polling people with $200k or $300k+ income than that's more likely. It really depends on where these 1500 were polled. Also having a home but not an emergency fund seems unlikely to me as well.

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