Millennials tend to get a bad reputation for work ethic, money management, and common sense.
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).
The Retirement Planner then 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?
The average household budget is pretty large nowadays!
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. This is 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!
ARE MILLENNIALS DELUSIONAL OR WISE?
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.
The Bank Of Mom And Dad Are A Big Help
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.
The Bank of Mom & Dad is everywhere. They are coming up with down payments for their children’s homes. They’ve set up revocable living trusts to provide for their adult lives. Grandparents are also pitching in to fund 529 plans for their grandchildren and for generational wealth transfer purposes.
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?
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When I was six my dad took me back to his childhood house in rural Kansas. Calling it a house is a stretch, more like a sturdy shack. There was a large garden because it was a requirement to have enough to eat. My dad stressed education to us kids. He was ashamed that he could not keep-up with his engineering classes in small state college in Kansas. He became a young Naval pilot. He went on to flying jets off aircraft carriers. He retired as a Naval Commander. His second job was for Lockheed. Every week day I remember he was up before dawn catching-up on take home office work. He made all the kids school lunches before we were out of bed from our earliest school years right up through high school. Both my mom and dad died this year months apart. In hind sight I realize my father accomplished much from humble begins. He had little to be ashamed of. I can honestly say I have not done better than my father even with more opportunities. Much of getting ahead financially requires a strong motivation and the understanding that no one owes you anything. Good luck to those who get a large family inheritance, but don’t truly appreciate the hard effort it may have required to obtain it. Yes generational wealth that goes on and on bugs me, as I think all to often it handicaps the receivers of it to do their best to pay their way. At best I appreciate the very wealthy who have plans in place to give away most of their wealth to charitable causes that reach the most disadvantaged and/or help find treatments to mitigate some of the intense suffering of so many around the globe. I don’t look fondly on the wealthy who “keep it all within the family.”
Adam and Eve were not renting out the Garden of Eden. People make, people to think that is the case, when they have the consept of paying rent. Adam and Eve were not evicted from the Garden of Eden for not paying rent. That is what God’s image is doing. Satan through them, imitating what God had to do. Pay properties. The earth is God’s, not ours even when a thing that comes from nothing, buys it. Millennials think they are rich and increased with goods having need of nothing. Pre flood people were like that. Jesus who is life is not in their mind. People are thinking, me, me, me, me, me, me, me. They are not warming up their voice to sing. The consept of affordable is nowhere in scripture.
I assume English is not your first language, because this makes no sense at all.
Well then, I’d say the title’s really not a fair thing to assume about Millennials in general. I’ve always been interested in money. Moreover, I’ve always been interested in managing that money wisely. On top of that, I would want for my children to be able to build their own wealth, leaving myself just enough money to be reasonably comfortable with, leaving my biological children with a very small percentage of my money, much of it given away to charity, teaching them to be self-reliant, and to think of it as an opportunity with which to build their own wealth. All this so that I may be fully realized as a man, spending the rest of my days at peace knowing my children won’t have to bother me… much.
The writer is apart of the generation that caused the greatest recession since the Great Depression. Millennials will end up better educated and richer than your generation mostly because we are more frugal than your generation. I will also remind everybody this guy thinks 200,000 is middle class. Most issues the economy comes from your generations free wheeling with free markets.
Its a bunch of ignorant ass bafoonery jabberjawin. The I know it all but dont know shit generation. With the point the finger cant be accountable for anything. That dont talk to or spend time with there kids. Thats the generation that screwed up the world for us Millennials. The fact they cant use a computer and grew up making double the buying power of what I do now. Then want to call us entitled.. At 27 I can run laps around anything my dad generation does. My Grandparents are alot better example of what a man/woman is. The entitled generation at the factory making 30-40 bucks a hr coming home to their own castle. While my generation makes $12.50 an hour and live with 3 roomates just to rent an apartment because all the starter homes are $300k while my parents generation refinance and buy swimming pools. Millinneals are learning how inflation works, how stock market works, how to retire, how finance works, studying all day long to make extra money thats value is half of what it was when they where in 20’s. But same idiots dont even realize how to take advantage of the money they have while it last. Because what they made 5-10 years ago is not the same as what they making now. But you cant tell em a dang thing they grew up reading the same 3 books their whole life. When the internet gives you access to every book written! Why don’t yall older generations humble yourselves and realize we are not the same. We are first level of the next speices working are way through fixing the nightmare economy we adopted from parents who cant respect others let alone stay together. I’m tired of hearing about the poor and struggling being the problem with why they cant waste their money materialistic nonsense. Always the loudest ones in the room with their hands over their ears.
Matt, you are part of the least educated generation. Your language skills are atrocious, as are your social skills. I must admit that it is my generations fault. We invented the video games and smart phones that damaged your generation.
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.