A new survey from Wells Fargo suggests that close to two-thirds of millennials believe that throughout their entire lifetime, they will never accumulate $1 million in savings.
The Wells Fargo Millennial Survey found that a total of 64% of participants did not think they would be able to save $1 million. Meanwhile, 59% said they have started to save for retirement, in comparison with 41% who said they had not yet begun to save. Of those who said they are not saving for retirement, 64% believe they are “not making enough money to save for retirement.”
“Saving $1 million is often noted as a nest-egg target to help fund a multi-decade retirement, so we wanted to find out if today’s millennials think they can get there. A majority don’t think so. Millennials may not realize that if they start saving consistently by their mid-twenties — and stay invested for the duration of their working years — they will likely accumulate $1 million by the time they retire,” said Joe Ready, director of Institutional Retirement and Trust for Wells Fargo.
Ready notes that it is possible for a millennial to save a total of $1 million throughout his or her lifetime. With earning a starting salary of $32,000 by age 25, if 5% of that was saved in the first year, increasing by 2% each year until a total of 13% was reached, that person would have $1 million by age 65. However, that assumes the earner is receiving a 2% increase in salary each year, is invested in the market, and has a 7% return on their invested assets. Ready stresses the importance of starting to save early in life, saying this can be started early on by reducing discretionary spending by $26 each week and putting that into a 401(k) plan beginning at age 25.
Of the survey participants who do not believe it possible to save $1 million throughout their lives, the average personal income was found to be $27,900. Of those who said they would not be able to save $1 million but have started to save for retirement, 37% put away more than 5% of their income, while 7% said they were putting away more than 10%.
“Almost half of the group who don’t think they can reach $1 million have already started saving; this group is on the right track in terms of already developing strong savings habits. The path to creating a sizeable nest egg is more achievable than many millennials might realize,” said Ready.
Meanwhile, of the group who do expect to be able to save $1 million, the average personal income reported was found to be $53,000. In all, 77% have started to save for retirement, with two-thirds putting aside 5% of their income and 28% saving more than 10%.
The survey also found that 34% of millennials carry an average of $19,978 in student loan debt. A total of 75% of those who have such debt felt it to be “unmanageable.” However, of this group, 70% are saving for retirement at an average rate of 5.5%.
Conducted by GfK, the survey included over 1,000 US adults between the ages of 22 and 35. An oversample of 500 Hispanic millennials was obtained for comparison purposes.