[June 11, 2018] |
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Financially Optimistic Millennials Aspire to be Millionaires, Retire Early
Millennials are optimistic about how their lives will play out after
college, despite the fact that they have a collective $1 trillion in
student loan, credit card and other debt hanging over their heads,
according to the TD
Ameritrade 2018 Millennials and Money Survey.
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TD Ameritrade 2018 Millennials and Money Survey (Graphic: TD Ameritrade)
"Millennials are graduating at record
rates, and it's great to see that like most previous generations of
college students, young people are optimistic about the future. On
average, survey respondents expect to land a job in their chosen field
and be completely financially independent by age 25," notes JJ Kinahan,
chief strategist for TD Ameritrade. "This is a financially optimistic
group that's feeling positive about the economy, the job market and
their own plans. However, they will need to develop saving and investing
habits that will help them reach some pretty big goals."
Redefining Life Milestones for Millennials "Millennials are
a generation that has vastly different attitudes and habits than
previous generations. So naturally, their lives and financial milestones
after college may look different as well," explains Kinahan. According
to the survey:
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Half (53 percent) expect to become millionaires at some point.
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One in four said they don't expect to get married, and nearly that
many (24 percent) don't expect to own a home.
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Nearly a third (30 percent) of millennials don't expect to have kids.
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Despite the general optimism, two in 10 said they're never going to be
able to pay off their student loans.
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Nearly one in five (17 percent) haven't yet achieved financial
independence from their parents; for those who have, it's usually
moving out of the family home that triggers being financially cut-off.
Planning to Retire Early or Not At All One milestone in
particular is going to need some extra attention. Millennials reported
that they expect to retire at age 56 on average (millennial men expect
to retire even earlier, at age 53 on average). However, on average, they
said they don't plan to start saving for retirement until age 36, which
could be more than a decade after getting their first real job.
More than a quarter (28 percent) said they don't expect to retire at any
point.
"One of the greatest investments young people can make in themselves is
to start putting money away in their 20s. Because of the power of
compounding (Einstein called it the eighth wonder of the world), even
with ups and downs along the way, those who start early potentially can
end up with more in the end," explains Kinahan. "Ideally, it would be
wise to start right after college, and while some millennials certainly
do that, we realize that's not always possible. Understanding all of the
available alternatives, like employer-sponsored retirement accounts or
brokerage accounts, can be a step in a right direction. And, if you're
not sure, talk to someone. The sooner you can get started, the better
your financial prospects may be."
Consider this example of someone who begins investing $5,000 a year at
age 22 and continues to put that amount of money away until they retire
at 67, earning an assumed 6 percent return. They'd end up with twice the
money as an investor who did the same thing starting at age 32. It could
mean the differene between retiring with half a million dollars versus
retiring with $1 million, according to a New York Times analysis1.
That's the power of compound returns.
Saving Habits
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Many millennials are making strides and overall, more rate themselves
as savers than did in 2016 (70 percent versus 62 percent). Ninety-four
percent of millennials said they are saving towards a specific goal -
vacation (43 percent) and emergency fund (39 percent) being the top
choices.
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Thirty-eight percent are saving for retirement.
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A quarter (25 percent) have started saving for the education of their
children or grandchildren.
Pursuing Financial Goals Kinahan offers some financial tips
for millennials who may need to look at additional financial strategies
to pursue their goals:
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Don't delay! Waiting to save for retirement can be costly.
Giving investments the longest possible time to grow attempts to take
advantage of the power of compounding, even with the downturns that
take place along the way.
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Know your numbers. Find out how
much more you can contribute each year to pursue your retirement
goal. For 401(k)s in 2018, employees can contribute a max of $18,500
(up from prior years), likely not a realistic level for most people at
this age, but certainly a great goal.
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Tack on an IRA. Grads who snag a job with a 401(k) retirement
plan and employer match should consider themselves lucky. But a 401(k)
is only one piece of the puzzle. Young adults should also consider
opening an IRA and making regular contributions.
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Negotiate salary. An un-negotiated salary is a missed
opportunity. You could be leaving money on the table simply by not
asking. Of those polled, only half negotiated their salaries or
compensation at their most recent job.
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Put windfalls to work. Try not to get carried away during tax
season and bonus season. Windfalls, even small ones, can be an extra
splash of cash for your retirement accounts. If you can, think about
"spending some, saving some."
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Get smart. Only three in 10 millennials (32 percent) said
they're very knowledgeable about investing. Free investing education
resources are available that fit every learning style. Tune in to the TD
Ameritrade Network if you're a visual learner, or try some online
immersive courses to learn about investing.
TD Ameritrade Network is brought to you by TD Ameritrade Media
Productions Company. TD Ameritrade Media Productions Company and TD
Ameritrade, Inc., member FINRA/SIPC, are separate but affiliated
subsidiaries of TD Ameritrade Holding Corporation. © 2018 TD Ameritrade.
The investment process does not eliminate the risk of experiencing
investment losses.
Past performance is no guarantee of future results or investment success.
About TD Ameritrade Holding Corporation TD Ameritrade
provides investing
services and education
to more than 11 million client accounts totaling $1.2 trillion in
assets, and custodial
services to more than 6,000 registered investment advisors. We are a
leader in U.S. retail trading, executing an average of more than 940,000
trades per day for our clients, nearly a quarter of which come from
mobile devices. We have a proud history
of innovation, dating back to our start in 1975, and today our team
of 10,000-strong is committed to carrying it forward. Together, we are
leveraging the latest in cutting edge technologies and one-on-one client
care to transform lives, and investing, for the better. Learn more by
visiting TD Ameritrade's newsroom
at www.amtd.com,
or read our stories at Fresh
Accounts.
Brokerage services provided by TD Ameritrade, Inc., member FINRA (www.FINRA.org)/SIPC (www.SIPC.org).
Survey conducted by Head Solutions Group Head Solutions
Group (U.S.) Inc., is a leading market research partner for Financial
Services companies in North America. With offices in New
York, Toronto and Montreal, Head delivers the deep customer insights
that increase institutional knowledge and propel business action. TD
Ameritrade and Head Solutions Group are separate and unaffiliated firms
and are not responsible for each other's services or policies.
About the Millennials and Money Survey A 15-minute online
survey was conducted with 1,519 American millennials ages 21 to 37 by
Head Solutions Group between February 21 and March 7, 2018, on behalf of
TD Ameritrade Holding Corporation. The statistical margin of error for
the total sample of N=1,519 American millennials within the target group
is +/- 2.5 percent. This means that in 19 out of 20 cases, survey
results will differ by no more than 2.5 percentage points in either
direction from what would have been obtained by the opinions of all
target group members in the United States. Sample was drawn from major
regions in proportion to the U.S. Census.
Source (News - Alert): TD Ameritrade Holding Corporation
1https://www.nytimes.com/guides/business/saving-money-for-retirement
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