According to a Wells Fargo retirement survey, millennials would like to retire at age 59. That presents some challenges. The good news is the survey also indicates they’re well aware of the need to save.
Jon Lagerstedt: This week we’re looking at understanding the needs of millennials to help financial advisors help millennials to accumulate for retirement. I’m Jon Lagerstedt.
Todd Crawley: And I’m Todd Crawley.
Jon: And this is The Essential Practice. You know Todd, there was in interesting survey that Wells Fargo just completed, regarding how millennials feel about their ability to accumulate $1 million for retirement, and, why they find that saving a million dollars in the course of their lifetime could be such a challenge.
Todd: Well, I think millennials look around and they see that the standard mode of retirement like social security and defined benefits plans are not going to be around when they get ready to retire. And they’ve heard now, and their whole life, that retirement savings is going to be on them. You think about where they are in their life cycle it looks like a long way out to be able to save a million for retirement.
Jon: Yeah, it’s so interesting, as I read through the survey, 50% of the millennials surveyed have already begun to put money aside for retirement. And four in ten, so, 37% of these folks are putting away more than 5% of their income. And 7% of those interviewed for the survey are putting more than 10% of their income away.
Todd: That’s a really good thing. I think generations before them probably didn’t do that much.
Jon: And yet, they still have this perceived gap between what they are able to achieve for retirement and what they hope to achieve. What are your thoughts Todd?
Todd: Think about where they are, like I’d said earlier, in their life cycle. They came out of college with basically a mortgage. Maybe they are getting married; maybe they have a child, trying to buy a home. They just look at all this and think, “How can I stretch this dollar to make all this work.”
Jon: Yeah. And one thing you touched on, Todd, looking at some stats within the survey, 34% of the millennials have student debt when they come out of school. And the median debt load for this group surveyed was just short of $20,000 dollars.
Todd: Yeah, no kidding.
Jon: And this [next point] I thought was most telling. The survey really shined some light on a couple of key groups that an advisor, in my opinion, might be able to focus on and be able to help. One in particular is women. 54% of the women surveyed report living paycheck-to-paycheck. 61% of the women felt that their finances were stretched too thin to even consider even saving for retirement. And most telling, 73% of the millennials women, who took part in this survey, don’t ever believe that they’ll accumulate $1 million in savings.
Todd: Think about that income level you mentioned, and coming out of college with a pretty hefty loan balance and all the things that they want to achieve in life—the math [makes it] hard to add up.
Jon: Totally agree. And as you look at who else was surveyed, there was a pointed effort to survey an additional 500 folks of Hispanic descent. And one of the more profound differences that the survey found was in the level of financial support that Hispanic millennials are providing to their extended families. One third of Hispanic millennials reported that they are currently providing financial support to two or more generations. That really presents some challenges and probably some rally unique planning opportunities for financial advisors to work with Hispanics and help them help their take care of their extended families, but also make sure that they are saving for themselves.
Todd: Yeah, the gap is clearly education, for both these groups right?
Todd: And education is power. Think there’s a huge opportunity for our financial advisors out there to give some basic understandings of budgets, and saving, and compound interest and what that will do over time—if they are diligent about employing some of those practices. So, I think you’re absolutely right.
Jon: And Todd, this seems like a natural segue to concluding today’s session around understanding the needs of millennials, and starting next week, [picking up on] establishing a plan.
Todd: Sure, and a link to the Wells Fargo millennial retirement study that Jon and I have been referring to will be on our blog AdvantageVoice®. So that’s all the time we have, I’m Todd Crawley.
Jon: And I’m Jon Lagerstedt and this is The Essential Practice.