If you’ve gotten a sense that Millennials, folks born between 1980 – 2000, seem to be a little clueless or delusional about money, you might be right!
It’s common practice for every generation to hate on the next younger generation. You should see the attitudes my fellow 65+ year old condo owners have towards the sub 35-year-old owners during our annual HOA meetings. It’s as if the younger owners don’t deserve to have the same rights as the older owners, even though the younger owners paid way more for their properties.
Given that roughly half of Financial Samurai’s readership is between the ages of 18 – 35, the proposition that Millennials don’t care about money doesn’t seem to mesh with reality. Most of you guys care a great deal, which is why you’re here. But let’s unearth the real reason why those other Millennials just don’t seem to give a damn about money, shall we?
WHY MILLENNIALS DON’T CARE ABOUT MONEY
After Personal Capital released its Retirement Planner, they anonymously analyzed the data of hundreds of thousands of users who proactively decided to test out the free tool for themselves. Each user inputs their future income expectations (raises, inheritances, windfalls) and expected expenses ($60,000 mid-life crisis car in 15 years, $250,000 in college tuition in 20 years, etc), and the Retirement Planner runs a Monte Carlo simulation with your existing linked data and new inputted data to come out with your expected retirement cashflow. Below is an example of my Retirement Planner output.
Below is the data that came out from the Retirement Planner user analysis.
Retirement Readiness By Region & Generation
- Delaware is the #1 most prepared state for retirement with the highest average amount of savings to date at $286,277.
- Connecticut is the #2 most prepared ($279,367 is the average amount saved).
- New Jersey is the #3 most prepared ($272,918 is the average amount saved).
- California falls behind with only $227,290 saved, landing in the #20 spot overall.
- East Coasters are the most interested in paying for their education goals: New Jersey, Massachusetts and New York rank as the top 3 savers for education expenses.
- Average savings for a 4-year education by New Jersey, Massachusetts and New York are $199,039, compared to California at #5 with an average of $174,684.
- Baby Boomers have an average of $554,805 saved for retirement. This is 125% more than Gen X ($246,924) and over 700% more than Millennials ($68,971).
Millennial Specific Data On Retirement Readiness
Everything we’ve read so far seems to make sense. The older East Coast is the richest region in America, while older generations have more saved up for retirement. Let’s now focus on the Millennial-specific data to see where things go askew.
- Home Purchase Spending: Millennials expect to spend just $142,274 on a home purchase compared to $686,739 inputted by Gen Xers.
- Vacation Spending: Millennials expect to spend $325,357 on vacations by retirement.
- Number Of Working Years: Millennials expect to work 15 years on average and retire (hmm)
- Retirement Savings: Millennials plan to save $445,687 after 15 years of work
- Inheritance: This is the biggest mystery of all. Continue reading to find the answer.
It’s clear Millennials are seriously divorced from reality! Sure, it’s natural to input more aspirational figures in any retirement plan, but a whole lot of people will be disappointed with such aggressive assumptions. Let’s go through the points one by one. Remember, Personal Capital has close to one million users, most of whom are college educated, and are comfortable with using technology.
Home Purchase Spending
The median home price in America is ~$220,000. Based on a $142,274 budget, it looks like Millennials are all planning on living in the Midwest (investment opportunity!). The locations of Personal Capital’s Millennial users are heavily concentrated on the large coastal cities.
You cannot buy anything in the entire San Francisco Bay Area for $142,274. Good luck getting anything reasonable for $142,274 in San Diego, LA, New York, Miami, Boston, Seattle, or Washington DC and its suburbs either.
Number Of Working Years
The average American works for ~40 years until they retire. Somehow, the average Millennial thinks they’ll be able to work for 15 years and hang up their boots. Does the average Millennial plan to start a personal finance site like Financial Samurai or something? It’s not a bad idea since you’ve seen real income profiles of financially free people who’ve done just that! Given the average Millennials’ retirement savings in this survey is only $69,000, retiring in 15 years seems unlikely.
With the median life expectancy climbing to over 80 for both men and women, it’s going to take a lot more money to support a 40+ year retirement lifestyle without work. Even with a frugal $30,000 a year for living expenses, the Millennial would need at least $1,200,000 in savings after retiring at age 37 – 49 (age the person was surveyed + 15 years), and that’s assuming zero expense inflation.
Vacation Spending
$325,357 in vacation spending just sounds insane, even if the $325,357 was spread out over a 40 year career to equal $8,133 annually. But remember, these Millennials plan to work for only 15 years and then retire. Hence, instead of spending an average $8,133 a year for 40 years on vacations, they will spend a whopping $21,690 a year on vacations during their short careers. Party on baby! Where’s that Crystal on my yacht in Ibiza?
Retirement Savings
Millennials plan to have $445,687 saved up by retirement. That’s not too shabby, especially if you have a pension or Social Security starting to kick in at 62. However, Millennials only want to work for 15 years! To save $445,687 in 15 years requires $29,712 saved up per year. It can be done, but it will take discipline. But if you’re spending $8,133 – $21,690 a year on vacations, you aren’t being very disciplined at all!
Inheritance Expectations
By now, you’re wondering what type of dope Millennials are smoking to be so far divorced from reality. Well here it is folks. The secret to everything! The average Millennial who tried out the Retirement Planner expects to inherit $1.06 million – twice as much income as from their paychecks! No wonder why they don’t care about working more than 15 years, plan to spend $21,690 a year on vacations, and only pay $142,000 for real estate. Their parents will hook them up!
Maybe they’re thinking they’ll spend $142,000 on just the remodel. And given Millennials won’t have a mortgage to pay, they can just kick back with their retirement and vacation funds until they get an extra income boost from their 401k and Social Security.
It’s all so clear to me now why Millennials emphasize “following their passion,” and “doing meaningful work,” even if they haven’t put in their dues. The data from hundreds of thousands of well-educated, technology-savvy Millennials from all over the country does not lie!
DELUSIONAL OR WISE?
Added a $1M inheritance assumption at age 50 and can now spend $20,000 a month (from $18,892) in retirement! Play around with your assumptions to see what the planner spits out.
Perhaps these Millennials aren’t delusional. I used to think hard work was the main ingredient for financial success. Now I believe hard work plus rich parents equals success!
Given the parents of Millennials have invested in the biggest bull market in history, it’s logical to conclude that Baby Boomer parents have a ton to give. $30 trillion in generational wealth transfer is estimated to pass from Baby Boomers to their Millennial children over the next several decades. That buys a lot of entitlement.
I’ve seen plenty of parents either bequeath their own properties to their adult kids or pay the downpayment on a new property for their adult children. Seven of my neighbors in Golden Gate Heights, San Francisco didn’t pay for their house thanks to their parents. I am the only donkey who decided to work 70+ hours a week while saving 50%+ of my after-tax income to buy my own place. I should have just asked my parents for the downpayment.
Let’s be honest. If you expected over a $1 million inheritance, would you bother to try so hard? I doubt it. It’s partly because I knew my parents weren’t rich that I’ve been so determined to make ends meet on my own.
What kind of inheritance expectations did you input into the Retirement Planner? How do we prevent our kids from being unmotivated, non-productive members of society if we have a significant amount of wealth to pass on? Millennials, what have you noticed about your peers when it comes to money? Have you called your parents lately?
Loading ...Updated for 2019 and beyond.
I realize this article is old, I came across it while researching money topics. I am one of the older millennials at 35 years old and most of my generation that I know don’t fit this article at all. A lot of millennials are renting in apartments that go up every year along with food, education, and child care while income stays the same. I am supposedly middle class, we make $90k per year not including taxes but it sure doesn’t feel like it. My husband and I both have college degrees and with that came student debt. I was very fortunate to be able to pay most of my education at a community college through babysitting. I also paid off my student loan in nine years. My husband was not so lucky and had a much higher cost for education and thus bigger debt by graduation. We are still paying his student loan debt. Our rent here in the midwest for two bedroom 935 sq ft apartment is now over $1200. It increases every year around $20.00. We have been trying to save for a house but that 20% down payment seems like a pipe dream.
As far as inheritance goes, we have zero expectations of that and most of my generation that I know don’t expect it either. My mother-in-law raised four kids as single mother after divorce and then her ex-husband died unexpectedly a few years later. She was living in her Dad’s house that was given to her when he died, but then had a stroke so now is in assisted care. Her medical bills basically took any of her savings she had.
My own parents have also had health issues. My Mom has had skin cancer so then later health insurance wouldn’t take her. My Dad was forced into retirement from the company he had worked for 20+ years when the bosses changed, then recession hit his 401k. He went back to work only to go into kidney failure. He was on dialysis and took two years to get kidney transplant. They both also have medical debt now.
I understand there are people who probably are able to depend on things like 1 million inheritance but I would say most can’t.
Thanks for sharing your perspective. Great job on paying your way through college and getting things squared away.
Don’t worry Samurai. We will replace capitalism, and with it all your “tips” based on living from profits stole from workers will be gone… Like you. Well, maybe you can live OK with your Universal Basic Income. Not in the US though. Cheers from the first world.
This article is BS. How many people can expect an inheritance? Also, kudos to all you hard workers. I’m 52 and I’m done with working hard. I want to chill out and relax. Wish I had an inheritance. Working sucks. Why couldn’t I be born into money? Getting older sucks too. I don’t want to live to 100. Hope I die before I get old. Rock n roll.
I chose other, because I have no problem admitting that I’m money hungry, and 1mil wouldn’t cut it….I want to be swimming in bens….
Wow, those numbers from that study are shocking, and a little sad. It goes to show that Millennials (my generation) are filled with unrealistic expectations, entitlement, or a mixture of both.
My running joke about inheritance is that I will get “absolutely nothing, divided by 4.” As you can probably guess, my parents have virtually nothing, plus I have 3 other siblings to boot.
That’s OK though, since my natural inclination is to not rely on anybody other than myself for any financial need or goal. I was shocked when my fiance offered to help me pay my student loans; I hadn’t even considered the fact that she would ever give me any money!
Because of all this, I’ve never even entered any inheritance into any retirement planning calculators I’ve used. Even if I had parents that were loaded, I would feel very uncomfortable making major financial decisions based solely on someone giving me a lot of money a long time in the future.
I’m pretty close to the middle of the millennial generation. I’m 29.
I don’t really like the word millennial. It sounds like a flower or something. Although, who thought naming a generation of people baby boomers was a great idea? lol. It seems like old people always think the younger people are little babies or flowers or something. I am not a flower. I do realize though that younger generations, including millennials really are facing some difficult financial obstacles which will likely get worse in the future. One thing though that I think people forget is that life has always been difficult. Millennials may have to pay more for healthcare, housing, and education, but we also haven’t as of yet had to fight in a world war for example or other terrible things other generations have been through.
There is great hope for the future. I believe firmly that humanity’s best days are ahead, not behind. We will face difficulties as all generations of people have, but there will be great things ahead for us as well. The line from a book comes to mind. “It was the best of times, it was the worst of times.”. I think the future holds both the best of times and the worst of times, but overall the best of times will ultimately prevail and the future will be very bright. If you think just from a physics perspective, good is more efficient than evil and so from purely that perspective, evil is unsustainable and will ultimately succumb to good. Maybe not in individuals, but on a macro scale. This is a true principle.
I also use Personal capital a lot and I love their retirement simulators. The way I have decided to try to get ahead is through something called house hacking. My plan is basically to buy multi family investment properties with small down payments by owner occupying. I have owned and lived in a 4-plex for about 2 years now. I am planning on buying another one in another year or two and living in it for a while also. I’m really just going to keep buying investment properties until it gets to the point that I obviously should buy myself a house.
For any normal person reading this, this can be a golden key to get out of the long term financial problems other people will face. Live frugally and buy multifamily investment properties with small down payments such as FHA loans.. And yes there are ways to buy more than one this way. Think for a sec. If you buy a 600k property for 3.5% down and live in it… You gain almost 100% equity yearly just from inflation. If you put that same money in stocks, you’ll get like 10% a year rather than 100%. The only other thing to do is be careful and charge less rent than you need to in order to attract fantastic tenants and always do background checks and credit checks. When I started, I had to evict some drug dealers and other criminals from the building I was living in. Don’t expect it to be 100% easy, but if you have a good strategy, it can work out very well.
Also though, I do invest in a 401k and also have a pension. I’m not against the stock market and I do invest in it, but it isn’t the only way to go.
I barely graduated high school. In fact I didn’t graduate, but I did go back later and get a GED. I haven’t been to college so I have no student loan debt and I taught myself to code. I am also married now and have a little daughter. Marriage and family life will bring you true joy. Make that your highest priority in life. I’m serious. Good things will follow if you build a family and treat them well.
Anyway, I just want you all to know that things will work out. Create a long term plan for the future for all areas of your life and then make it so. The future is bright. Things will work out. Be smart with how you use your time and energy. Be strategic and revisit your strategy regularly and make course corrections. A good strategy executed over a long time can be very powerful.
The numbers needed to retire on this website are a joke. If people really needed that much to retire the entire system would collapse in 20 years because only 5% of the population are coming close to the 401k savings needed to retire. Healthcare costs and college tuition are essentially a bubble that’s going to burst. My 401k calculator calculates that by 2045 my healthcare premium costs will be $9850 a month. They base this off an algorithm based off current healthcare premium increases in the last decade. Shits gonna hit the fan…. the best investment is in physical guns.
Hi, I’m 24 years old and about to graduate undergrad with a bachelors in STEM. I took a 180 and decided to take a job at an investment bank. My dad was an immigrant and became a physician who worked very hard and saved frugally his entire career. My mom was a teacher and met my dad in college. I grew up somewhat privileged, but my brother and I had no idea how much in total my family really had.
The house I grew up in is currently worth 1.7M, 2 weekend getaway downtown condos are about 600k a piece, and 4 additional houses around the suburbs 200-300k my dad bought for his mom and other relatives under his name. I will not have student debt and have capital inside brokerage accounts and retirement accounts. I recently went to my family’s wealth management meeting and saw the portfolio value to be 16M. They established an irrevocable trust, meaning they cannot take money out, but only put money in. This is to ensure the government intervention. My brother and I will eventually inherit this compounded amount without the government touching anything over 10M each, given my brother and I are both married.
I don’t flash around vanity, and I try my hardest to keep finances out of friendships and relationships. That’s probably the most difficult part of growing up affluent. I don’t have the drive like I see in others, which I sometimes envy but at the end of the day, I wholeheartedly respect those who are so driven and ambitious in a cutthroat world. Right now I find I have a lot of free time, and I’m grateful for each day by exploring new things that fulfill me.
Whoops, meant to say this will ensure the government will NOT intervene.
Dear “Financial Samurai,” (are you Asian? If not, that business name is racist in the public domain)
This is a grossly inaccurate article, which is sad and confusing coming from such a well self-accredited financial advisor. Check your numbers, or reality, whichever is easier for you to comprehend. As a millennial, I live thousands of dollars below the poverty line, expect no inheritance, have no faith in social security as an institution to benefit my generation in any way, shape, or form. I don’t expect to ever retire (that’s honestly a laughable concept), and I don’t expect to ever earn close to anything my parents did over their lifetime, because folks in your generation have the money.
If you live in a house, GFY.
If you can afford to have, and support a family, GFY.
If you have enough food for yourself, and others, GFY.
If you’ve personally benefited form any inheritance, GFY.
Honestly, va te faire foutre, because you have absolutely no idea what you’re talking about, no sense of what millennials face as a generation, financially, or socially, and no grounding in reality likely due to your personal wealth.
Be grateful for what you have, and have the humility not to slander an entire generation of people that’ll be wiping your old ass one day.
Hi Regina!
Thanks for your words. Unfortunately, I’m not sure if you’ll be able to get out of your situation with your attitude.
People want to work with, promote, and spend time with optimistic and kind people, of which you are displaying any of those traits.
Yes, I’m Asian. How about you?
Related: https://www.financialsamurai.com/rich-spoiled-clueless-work-minimum-wage-job-at-least-twice/
Sam
#1 – He is Asian American but even if he wasn’t it wouldn’t be racist. At worst, it would be “cultural appropriation.” Racism is the belief that races are superior or inferior to others. A white or black person wanting to be a samurai in no way would imply racism, no more than an Asian kid dreaming of being John Wayne or Bruce Willis be racist.
#2 – While a huge % of millennials will not inherit, a large % will. It’s simple math. There are over 10 million households worth at least a million bucks and most of that will pass onto a millennial [plus many more with over 250k].
#3 – Your attitude is horrible. I grew up poor, zero money for college, no private schools, no inheritance, started off making just above minimum wage as a cashier at a grocery store; 15 years later I now make more than $300k/year with zero financial assistance from anyone. It took a lot of time (both extra hours, unpaid usually, at work as well as education both through the system – adult undergrad + mba programs on my own dime – and ~2 hrs of research a night on my own from home on various thing) and I had to forego a LOT of friend time while building my career and a decent amount of family time to achieve what I have.
TLDR of #3 – stop whining, start doing
Thanks for getting my back Rob! And well done rising to your current position!
There’s another thing many folks can’t understand…. satire. Come on folks. Of course I’m not saying every millennial doesn’t give a damn about money b/c they are all gonna inherit boku bucks. But it makes for a more interesting title, and fun pictures as well.
Do not forget to be entertained sometimes. Life is more fun this way.
“Do not forget to be entertained sometimes. Life is more fun this way.”
Agreed! Once I hit the ~$200k/yr mark a couple years ago I drastically reigned in my hours as I no longer desired to keep moving up corporate America like I was earlier in my career (although still got promoted from Sr Dir to VP since then). I actually work the fewest hours/wk now (45-55 hr/wk~90% of the time) than I ever have since I joined the workforce because I don’t care if I ever make it to CFO at this point and I take at least 3 week long vacations per year now vs only 1-2 earlier in my career.
lol you people are so blinded by your own experience and privilege its unreal.
and save the unverifiable anecdotes that curiously always indirectly promote free labour as a necessity to get a good job.
too much is being demanded on our generation with very little return if not outright lies. all in an effort to further blind is to the reality that we have and continue to be exploited, scammed and lied to for the benefit of the already established members of society.
blaming out very real problems on us and accusing us of this and that is not only not helpful, but actually very destructive. youre writing an article for click bait— a lesser exploitation of our disposition.
Ever been to war or shot at on the street, have a medical event, been a missionary to Haiti? Every generation ahs challenges. Thank God for what you DO have, get to work, save your money, spend less, and DO NOT Quit. Have hope. We live in the most prosperous country in human history. Try your best to join it while helping others along the way. Make goog moral decisions all the way and it will work out. I believe in you, so belive in yourself and just try to keep moving forward. If an idiot like me from Arkansas can do it, I know YOU can!
Rob’s entire comment is basically saying that this article is bogus based only on Rob’s personal experience.
Better have good life when you’re young. You might not survive to pension.
And it’s better to invest money somewhere than put into bank. And move to cheaper place than USA or Europe (Russia, Taiwan)
At the age of 27 I fall in this range and do not care about the fiat economy,money,or work. This is due to with 10 years of post secondary and 13 years of grade school most of my generation was told we will amount to nothing boy were they wrong I made 1.3 billion cdn dollars and gave it all away due to I seen the damage it causes as a slave tool for millions of canadians and that is exactly what it is a slave tool, with a false hope of making more when in reality most companys do not even adjust for cost of living and the tax hikes are insaine if you live on 50k a year your not living but slowly dieing from 40 to 90 hours a week only thing that is defying this it 30% of population live longer each year, due to medication and serility.
Now the reason why I gave what some call a fortune away is because I knoticed that everyone in my neighborhood was working their peverbial asses off and making dick 50k or less usually 20k to 30k not including the cost for school and thier spoiled wives expensive habits including a nice home more less I knoticed humanity lost sight of the bigger picture it is not about money or work it is about evolution (which proven fact we are sped up evolution not natural but most will deny this because of ignorance to see what is infront of them) anywho once I realized this I went around and asked what do you think would make the world work and care about money they all almost answered (money and work does not matter all that matters is at the end of my life I can go out my way and people will understand) needless to say I found this statment odd and disturbing then for the next six years I sat on my hands living on 22k a year only to come to my conclusion when people make less and see the damage from a false economy they tend to bo longer care I too had begun thinking like my neighbors enough is enough I sold my company for resources and then sold the resources took my total 1.3B $ and asked my accountant to make as many 500k checks receiveable by anyone that cashed them and placed 1 in every mail box in my neighborhood then went to the next and the next till I was down to 500k myself. I made everyone equal in theory and I started to see a positive reaction around me everyone was happy again working less and you could see life comeback to them. Needless to say I discovered humans would rather die than work for 10% of nothing and after asking around again how people were doing they said that their heath was up they could spend time with loved ones and surprisingly many also said they had the time to teach and train their husbands wives and kids. Mad me realize unless you make 100k a year at 20 hours a week minimum your quality of life rapidly declines. I ask a few government financial advisors why this is and every single one told me the fiat economy and money as we know it are tools we use to control people so that many cannot succeed in hopes of lowering population. I knoe this whole story may seem far fetched but I personally can say this all happened in reality and I’m glad it did because I too am now worthless just like the rest of our primitive race we hold the vaule of resources and money above life when in fact we need to hold life and quality of life above it all and disband the fiat economy and let evolution take over for another 4million years or yes we will all die with the greed of money so for those who say my generation do not care you are right we do not and this is because most have real genuine lack of hope not that they are waiting for their parents to die to get money these days if a person is not happy with dirt then they need either a bullet or none existance
The problem here is that you took data from a set that obviously only targets people planning for and expecting to retire. I keep seeing sources claiming that 2/3 of millennials don’t expect to EVER be able to retire, so you’re already sampling only the top 33%. I expect this is further limited by the location of the surveying business, which is presumably a wealthy privileged east coast area.
I’ve been working full-time (college grad) for 10 years, and have never earned over 25k per year underbidding the hell out of my parents’ generation to get the work those motherfuckers refuse to retire out of. I, and most of my contemporaries, would find it hilarious that you consider 30k a conservative cost of living. A lot of us don’t and can’t afford to live near the coasts or in urban areas, precisely because it’s expensive.
I don’t care about money beyond my ability to pay my bills and eat. I studied economics, and can easily see that labor is currently a buyer’s market. I also watched my parents lose their retirement savings twice in ’01 and ’08. Wages are stagnant or contracting depending on your industry even as productivity rises. Millennial contempt for money is real, but it’s not about the rich twats you’re talking about here, it’s about despairing of the concept of generating any lasting wealth or attaining any level of financial security.
My parents have a net worth of about $5m in real estate, but I still work extremely hard. I’ve never added an inheritance to my calculations because I don’t think it’s something that should be taken for granted. You just never know how family relationships will turn out in the future, or if catastrophe will strike.
I agree; I’ve seen a huge sense of entitlement in many of my peers, and a mentality of blowing money like it grows on trees. It’s a relief to come across your site and not feel so alone in my financial mindset, which often makes me feel isolated from my friends and coworkers.
I’m a 23 year old living in the Bay Area like yourself. I commute 40 miles each way for work (80 mi roundtrip) – I’ve put 18,600 miles on my car since January of this year – to live with my parents. I save 50%-65% of my take-home pay which is not easy considering I don’t make a software engineer’s salary and I only have 2 years of work experience.
Instead of renting a room for nearly half my take-home pay, I purchased a home with my mom as a co-signer. It’s not a great neighborhood and even further from work, so I still live with my parents and rent the entire house out. I get $400/month after the mortgage and expenses. It appraised 8 months after we bought it for an over 10% return on our downpayment. I need to pay my mom back the downpayment (I’m about 15% of the way there), but I’m feeling happy at the financial stability I’ve begun to create. I’ve surpassed the extreme net worth goal you’ve outlined for 25 year olds by saving, not counting the appreciation of my home. But I still have a ways to go and tons to learn.
I am motivated out of a desire to repay my parents for everything they have done for me. Maybe it’s the Asian side of me coming out but I want to take care of them when they’re old, and given that they had me when they were 40, I don’t have much time! I’ve also had excellent role models in my older sister (38 and no longer works) and brother (just purchased a $2m home, has millions in other investments). They started from zero, hustled, and sacrificed to get where they are today. I am lucky in that regard–I think a lot of my fellow millennials don’t have family members who can demonstrate the beauty of living within/below your means to achieve financial freedom.
Very interesting about the inheritance part! The funny thing, I’m in that same boat. I didn’t know the situation was so widespread. And yes, I’ll admit it puts a healthy damper on my independent motivation.
Expounding on just the inheritance topic, I think the biggest risk to any aged parents’ assets is healthcare, especially nursing home care. I’ve seen friends’ families lose the entirety of a potential multi-six-figure inheritance to nursing homes and hospitals. Amazingly to me, these friends didn’t seem to care, thinking, “well, it wasn’t my money, so whatever.” When combined with a “self-made” social culture where each generation expects to start out from zero on their own, it seems the system is designed this way, to opportunistically mop up old folks’ money and prevent generational family wealth transfer.
But a major factor allowing this situation in the US in particular is a cultural lack of interpersonal trust. If family members are apt to screw over one another, or to be stupidly wasteful or risky with money, then there is no hope of safely pre-planning to prevent such a loss. But if family members can truly trust each other and be responsible (as was the case between my parents and grandparents), then it’s far better to slowly legally transfer over as much wealth as possible years before potentially expecting to get sick. By the time my grandparents needed major healthcare and nursing home care, there were nearly no assets legally left in their name for a number of years already, and therefore nothing to be taken, and so insurance covered everything (I think there is a legal 5 or 7 year period before it’s “not theirs” from a healthcare point of view). Sadly, in this age of family lawsuits and divorces and selfishness, this approach probably wouldn’t be practical for most families.
I wonder what average or poor millenials think about their life…
That 1M$ inheritance entitlement it’s just spot on. Coming from an average family to a top 3 high school, the “where’s the crystal In my yacht in ibiza” just haunts everyone.
Some of their parents even have lived that life and now are paying their dues, but still raise spoiled brats lol
Go have an earnest conversation with someone in the age group you’re slandering.
See if you still have the ability to change your mind.
As a second year engineering student, I am disgusted by the lack of awareness many of my peers have regarding their financial future (and present). I have seen so many lazy and overpaid workers at my customer service work study job, it makes me want to vomit. We all get paid $11 an hour to process a few packages and wait around for customers to show up. People have the nerve to complain and do the few simple tasks they have to do incorrectly. Very few people show enough pride in their work to do more than the bare minimum.
Many of my peers don’t value their education at all simply because they are not the ones paying for it. They know their parents will pay their way through life.
On the other hand, I’ve worked harder than anybody my age I’ve ever met. This might be because I’m aware I will have loans to pay, my retirement to plan for, and the retirement of my parents; I’d say it’s because I see the value in the work I do. If I find myself talking about my job(s), it blows their mind that I would work more than 40 hours a week.
I’m horrified
This is why you are going to be financially successful, and your peers are going to feel lost and out of sorts with their money years after they graduate. You have the right mindset to be rich and financially independent. Embrace it, practice good processes, and sooner or later you have the freedom to do whatever you want for the rest of your life!
There’s nothing more rewarding than making your own money and making your own success. I’d much rather have something I created on my own but inherit something.
I am one of the last years of Gen Xers. I worked multiple jobs in high school, college, and the real world, have saved like a fiend for retirement and am about on Sam’s above average track for net worth for my age. I would be thrilled if I didn’t end up supporting my parents at some point. Inheritance? Not so much. I do have friends who expect to receive something, but not so many. And if you are depending on that, you are delusional unless your parents are not just well off, but downright rich. A few years in a nursing home can wipe out a portfolio in a hurry. Better to make it on your own. Really enjoy reading your thoughts, Sam!
Thanks for reading and sharing Chris! Good job growing your net worth like a beast! You won’t regret it, because nobody regrets the freedom to choose.
Umm..have you looked at actual savings rate for boomer generation, not just those who entered data into wealthfront?
Because financial retirement planners have given me a very different picture about American savings rate, so the wealth transfer may not be as large as you think…perhaps
Nothing is certain, and I’d feel like a dope if I lived my life planning on a $1 million dollar windfall and it didn’t end up coming for one reason or other. Hell, they could outlive me! Plus $1 million dollars isn’t even enough for my ideal nest egg size. It’s not like I could live a dramatically different life with $1 million dollars. There’s always ways to increase and expand the family fortune. There’s no reason it should be earned in a generation and spent in the next generation. I do think this contributes to wealth inequality and that wealth inequality is a huge problem. The way I’d view such an inheritance is that it’s something to be preserved and grown for the benefit of future generations who may need it, and expanded to help others outside the immediate family.
I am a 16 year old boy that cares about his future ( hence why i am on this site), but this article is completly true people now just see pictures on twitter of 20 through 28 year olds with a lot of money and believe it is true but do not acknowledge the fact that it is just a picture on social media.
Buddy, the world is horrifying and poor. 20 somethings aren’t rich. If it appears so, they’re still supported by their parents. We call this the 1%. If you don’t have nice things, you probably don’t belong to this percentage. Most of us don’t. I’m sorry. Social media is toxic, delete your Twitter.
The whole inheritance thing just creeps me out. Coming from an Asian background, if you so much as think of the word “inheritance”, you will immediately be treated to a loud slap from the back of your Mom’s hand.
So yeah, inheritance was never part of our retirement plan, and it’s disappointing to read about other Millennials thinking this way. I’m actually pretty surprised, because I don’t know any Millennials who are considering inheritance as part of their retirement plan.
Oh and to your point about:
“Even with a frugal $30,000 a year for living expenses, the Millennial would need at least $1,200,000 in savings after retiring at age 37 – 49 (age the person was surveyed + 15 years)”
I get that you’re using a yield 2.5% to be super conservative, but we’ve found that you can get a 3-4% yield without incurring much more risk. And not only that, once you stop working, your costs go down significantly (no need for daily transportation, spa treatments, dry cleaning, etc, etc and vacations are WAY cheaper). And if you retire young, you will mostly likely pick up a side gig and generate income, which brings down your SWR even more. So there’s really no need to be THAT conservative. You have lots of knobs to turn in retirement.
Hopefully with all the finance blogs out there (including your own), Millennials will become more self-sufficient and care about money.
Yes, I’m being conservative on the yield/withdrawal b/c it’s better to be conservative and wind up with lots left over than be short. You may enjoy this post: The Ideal Withdrawal Rate In Retirement Touches No Principal.
You’re right about the ability to freelance and earn extra income. W/ the gig economy and the internet, being able to make supplemental income is everywhere!
I’m with you on being slightly creeped out. I don’t think about an inheritance from my parents, because a) it’s a bit creepy to how I will benefit when they, you know, die, and b) it’s their money.
I assume my parents might have some sort of modest estate upon their deaths. I have no idea what it might be. Do I expect to receive any of it? No. That’s because, as far as I know, they will donate their estate to their alma maters. Or to a charity somewhere. Or they will divide it up among all the members of our extended family, including grandchildren, cousins, step kids, and those “aunts” and “uncles” and “nieces” who are family friends, so everyone gets just a tiny amount. Or they are going to go all out when they are 80 and blow it on a wild, around-the-world trip (eating pounds truffles and gilded potato chips the whole way – good for them!). Hell, maybe they secretly have a ton of debt and there is no estate to speak of.
My point is: who knows?! It’s their money, not mine, so I don’t make any plans based on it, and I certainly don’t harbor any morbid fantasies about how I’ll spend it after their sad and unfortunate demise.
The inter-generational wealth transfer that will happen over the next few decades will be unprecedented in world history. If people choose to work in traditional jobs less and travel, create, and take more risks more, we will all be better off. So will the millions of people living in third world countries like Thailand who get to charge $2 for Pad Thai instead of $1, so I’m all in favor of Millennials getting money as long as they don’t blow it all on standing paddle boards and mini-yachts
I just laugh when I read these zillion dollar figures passing from one generation to another. Completely ignores extreme concentration of wealth, where a very small minority will get the bulk, while the majority will get at best very modest amounts.
Sam,
this is similar to your “Wealth Transfer” article…i think the word “entitlement” best defines this particular generation…
when my parents inherited my grandparent’s house it was only worth about $120k and had to be split between 4 siblings…that’s nice money but it’s not life-changing…
my parent’s house is currently worth over $250K (Florida) and i have to split it with my sister…$125k is good too, but i still need to save all i can
As a millennial a 1 million dollar inheritance wouldn’t change my life. It’s frankly not that much money. Even a retirement on 5 million at 37 (15 years of work) sounds tight. Assuming you live another 50 years… A modest 3% inflation would make your 5 million have the future purchasing power of only a 1 million today. Your future retirement would thus be determined by your ability to achieve market returns that match or exceed inflation and withdrawal rates that preserve capital (especially in periods of low returns). This all assumes you are never unlucky enough to experience a loss of capital from a bad turn in the market. Who wants their standard of living so dependent on the whims of the capital markets at any given time. Not me…. Diversified streams of income is the only true security. A marketable job skill is a way of adding diversity to your income streams to help insure you against market risks.
I think this is very true or some people of that generation. Even though my parents most likely have a networth over 10M, I am working as if I will receive $0. One of my siblings is not even working, and actually quit his last job and hasn’t worked in a few years. My parents still support him and pay all his bills.
It depends on the person, not he generation.
A lot of people my age have no desire to have children, save for the future, etc. They want to live in the now.
$10M is a huge net worth! Do you think your sibling is not working b/c of this reason? Hard to get motivated if your parents are still supporting you as an adult.
Oh definitely I think it is the reason why.
10M is easy if you have a good income, and live as if you have a modest income.
Hi FS,
I’m in this category of humans, american, millennial, wealthy parents, old east coast money. I think of things differently than those who entered data into the Personal Capital tool. Yes, boomer wealth might be transferred one day, it also may be entirely used up on long term care by our parents. It’s definitely not to be counted on. Which means I must find my own path and generate my own wealth. I think they already passed on “wealth” in other forms than cash: real estate knowledge, portfolio management knowledge, paid education, estate planning, tax avoidance, etc. Instead of banking on a transfer of wealth, I’m using what my family has passed down to achieve certain financial goals. I find that they respect this approach. They’re more willing to help in other ways than just handing over money…such as backing a home loan with their portfolio. I do think many of my peers are pretty clueless about money though, whether they come from a wealthy family or not. Excessive consumerism and lack of savings are the 2 most prominent themes. I think they’re missing the big picture of amassing investments so that their portfolio can produce enough passive income to actually take all those vacations. We were given too much growing up, in my opinion, but some of us also graduated around 2009 and had an abrupt transition into reality. Many returned to their parents home, some struggled but tried to live on their own. But, overall our bunch is doing much better now, especially with regards to employment opportunities and producing income. Time to squirrel away that paycheck! Long term care is no joke.
“seem to be a little clueless or delusional about money, you might be right!”
I’d be careful with overgeneralizing because I fit that definition of millennial, and I am the most financially knowledgeable individual of whom I’m aware with the possible exception of Harry Sit over at thefinancebuff.com.
“Might”
Thoughts on the thesis that bc of expectations of a large inheritance, attitudes change about money and work?
Firstly, I realize you are taking a critical look at this topic; I suppose my target is the financial media who repeatedly hammer the theme of financially inept millennials.
The amount of money I factor into my retirement from inheritance is the same I factor in from social security: big ole goose egg. Why? That’s not really money I control so I’m viewing it as a bonus and not as part of my plan. I don’t think social security will play no role in my retirement, but I prefer to just think of it as a back-up.
Do I know people who are banking on inheritance? Yes, I do, and those people do live a relaxed life knowing they will inherit a large sum. I also know people who will have a large inheritance, but work hard to be self-sufficient anyway.
Regarding people who think that they will unrealistically inherit 1 million dollars… I know of no such individual. I’m not saying they don’t exist just that my circle of friends don’t fit this particular paradigm.
My experience is that people overall have been financially unsophisticated and their butts have been saved by pensions and/or unintended home equity from mortgage payments. That’s wearing off now, and I believe that younger generations have woken up to this fact. The criticism we are seeing is more of a reflection that percentage of younger folk who are financially inept won’t have pensions as a safety net.
“My experience is that people overall have been financially unsophisticated and their butts have been saved by pensions and/or unintended home equity from mortgage payments.”
I somewhat expect to receive a pension, but it isn’t “saving my butt.” 9% of what shows up in my paycheck is skimmed off pre-tax to go into a pension fund that I MIGHT see in the future. That’s up 2% over a year ago. I don’t have the option to “opt out.”
Just wanted to ensure that it is understood that pensions are not “gifts.” One pays for it, one way or the other.
Exactly you are forced to pay into the pension and if you have a mortgage you are forced to pay down principal each month or else you lose your house. It is being forced that saves people’s butts. If they had that 9% in their checking account they would probably spend it rather than invest it in something.
So delusional, but, I was delusional too at the age of 25. Look at the Baby Boomers, many unprepared for their retirement.
I’m at 24 y/o who could very well receive some sort of inheritance, not 1 million liquid but they’re assets that have to distribute somewhere. I have a mindset that I’m not entitled to anything and I think it’s because I’ve seen families have disagreements when they have to separate wealth from a recent passing. Family members often feel they have the right to claim a stake. I understand that each situation is different but the best thing I can do for myself is to rely on myself for creating the end goal. Anything that’s passed on to me is a bonus!
It always interests me when people make the argument that being rich will make you unmotivated or lazy, etc.
I, and my 8 cousins, have been extremely fortunate to have each inherited about $1M when turned 18. The money has essentially been passed down for 3 generations, each generation caring for it and adding to it so that it can be passed down to the next. The money is never considered “our” money, but “family” money that gets passed down. The purpose has always been to provide security, education, and health care. Although it will likely also help with a down payment and some nice vacations.
Of the 9 of us, I dont think any of us have yet spent a dime from that inheritance except on college (yes, Ill admit this included rent and beer money, though I did have a job in college) or emergency medical expenses. We range in age from 21 to 36 and none of us have kids yet. Of the 9 of us, all but 1 graduated from top programs and are very successful in our respective fields (the youngest is hard at work as a housekeeper in a hotel). Im not trying to brag, I just dont think anyone would look at any of us and call us unmotivated, or guess that we each had such large bank accounts for that matter.
Having gone to some of the top schools in the US, I have hung around a lot of people that inherited or will inherit a hell of a lot more than me, and nearly all of them are extremely motivated and hard working people. Lawyers, doctors, investment bankers, entrepreneurs, CEOs, Scientists, etc. In fact, since leaving school, I am generally depressed by the average motivation and skill level of our workforce…
Motivation comes in a lot of shapes and sizes. While some people are undoubtedly lazy due to money they inherited, some people work extra hard because (italics) their parents are rich and they need to prove themselves to their parents as much as anyone. Others have different reasons.
In my case, I look at the marvelous childhood I had, the comfort that financial security has given me in times of crisis (yes, even rich people have crises), and I want to provide that for my kids. If I have 3 kids and I give them the same I got, thats $3M hard cash before we even account for inflation, not to mention all the costs of raising kids. So I’d say I have my work cut out for me just to maintain the status quo in my family. But I think every generation wants the next to do better than they did, so add another 20% or so on that, and you have some significant financial motivation even though I already have a big head start.
On the other hand, I could just say f-it, and go party…. but we’re not all Kardashians. That said, Im sure there are plenty of interesting statics showing how fast family wealth declines over the generations…
Lastly, for those who are against passing on inheritance, I cant emphasize enough how quickly life can change, and what a difference having that money can make. For example, say you plan to earn $1M by retirement, but you suffer a serious accident 10 years into your career, and you never make it to that $1M… It is the best privilege to not have to ask yourself that question. I wish everyone had the same, and I’m extremely grateful that I have this privilege.
I don’t think 1million will get them as far as they think!
Sam, can you address my question because I believe its rather important. Part of the issue I think your article based on millennials think they can retire early may have to do with PC’s retirement tool, and the high assumption of high returns going forward. Why has PC used such high assumptions going forward? based on what? Why? I also do think most readers of FS are way above average when it comes to Personal finance so I am sure most of us take most assumptions as a grain of salt. But a lot of others out there might heavily rely on such assumptions…
I am one of those millennials who saves over 60-70% or more of my income after taxes. Using PC’s retirement planner I did not include any windfalls or inheritances. But the metrics PC use to calculate assume a rather high return of rate, with a high savings rate over 15 years or so, its easy to assume with a 9.4% return rate based on historical data which PC uses one could easily retire really early. Even the results that I am getting with my current net worth and my assumptions of what I can save over the next 15 years plus the estimated high rate of return, I could easily retire. Well if all goes well and we see those high returns, which I am not counting on, sure I would retire early. I would take my asset allocation and get more conservative, and get into more of a preservation mode to make my assets last. Also the word retirement has changed a lot these days, especially those who want to retire early say in their 40s or so. A lot of the times, most these early retiree saved up a large large nest egg… but they focus now on what they want to do, even if it means making less money to avoid starting to withdraw from the nest egg, which gives them more time for their assets to keep growing. I can respect that! I would like to “retire” in my 40s also, with a large enough nest egg I will feel confident enough to take the risk to move on and away from the daily grind. The thing about retirement calculators are just that, they are estimates, no one can really know the future returns of all asset classes. As it is I think most financially savvy people, especially FS readers, they know better and I bet most of us here re evaluate our situation year after year. I for one can’t say for certain I will feel comfortable to retire in the next 15 years, there are too many what ifs, and uncertainties.
I don’t feel the need to prove myself by earning my own money, but if my parents want to leave money for me, then I will appreciatively take it.
I’m expecting, but not budgeting, for somewhere between 100k and 300k from my folks, mostly from the value of their paid off house. My crazy uncle and aunt have a few mil, no kids, and my brother and i are one of only 3 nephews/0 nieces, but they are rumored to plan to leave all of their wealthy to the local pet shelter and knowing them they may well do that.
My goal is to retire with at least $3m (pref 4-5) million at age 50. If I got a million from my uncle before then, I’m not sure I’d slow down at all but it would make me significantly less likely to keep working past 50 (34 now). I just got a huge raise last week so feel like I’m on the right track, despite losing a good amount of money in housing from 2005-2012 and not saving enough until about 3 years ago. Should sock away about $60k this year and hoping to increase to $100k/yr within 4 years.
I’m a cusp millenial. I was born in the year range, yet there’s another definition that puts me in Gen X, and a 3rd that leaves me in an unnamed gap between the two. Yes, my mom bought my younger sister her condo. :/ It was actually mom casually mentioning how much she thought each of us kids would inherit (including her house / sister’s condo as assets) (add in my dad’s potential numbers), that got me into the FI community, looking for how to best invest ~$1M. I know fdic only ensures to a set amount so I thought, let me see what else people do with that much money. Seeing what people like Mr Money Mustache, Go Curry Cracker & others have done, inspired me to say, why wait? If I’m pretty frugal to start with (thanks mom & dad!), can I tweak some things and get to FI on my own? Enjoy my time with my parents, let them spend their money, and if there is anything left as inheritance, it’s bonus, because I got myself to FI. We’ll see!
With the average life span continuing to increase, I believe some will be very disappointed to learn their inheritance was used for those extra years or long term care. I would love to see an article on average life span, long term care costs, long term care insurance, life insurance policies, and average funeral costs. This might change some views and give perspective. Walking millennial through this, and helping with money management toward the end of their parents lives/after will soon be big business.
If you are in long term care for 4 years at 8,000 a month that is 384,000 dollars. I think the average stay in long term care is more like 2 years. If you are expecting a 1 million dollar inheritance that is definitely a big dent but still leaves you a very nice amount. Maybe the millennials responding to this survey will end up working 20 years instead of 15 years.
I agree Scott. I think the expected inheritance may be as overstated as the other figures in the survey. Most millennials have no clue what the may inherit. They may certainly think their parents who don’t share intimate details of their finances with them are doing far better than they actually are.