We’re definitely in a period of “fake news.” Two stories on Yahoo make me think April Fool’s Day was postponed to May this year. The first story claims millennials save for financial freedom rather than to leave the workforce and retire. It cites a Merrill Edge study that claims the 18-34 age group is saving more money than any other age group. That’s hard to believe, given a Consumerist article two weeks ago that said nearly half of Americans are not able to cope with a $100 surprise expense. CNBC has run several stories on a March 2016 Economic Policy Institute report that shows median savings are pathetically low: only $480 for ages 32-37.
From the Merrill Edge study, “average income they say they’re saving per year”:
Gen X: 14%
I started to question those numbers, but then realized it’s self-reported. (Re-read that quote above the numbers.) Digging through the article, it says millennials are more likely to spend money on travel, dining, and fitness than to put it into savings.
Sadly, the only thing in the article that rang true was this line: “they’re not thinking about retirement as a phase of life”
Curiously, another article about millennial savings by the same Yahoo author claims millennials are “more eager to pay their own way at younger ages than when baby boomers think they should.” That one claims a Bankrate survey. The funny thing is the conclusion: “The dream of financial independence and the reality of their current financial situation continues to be at odds for many millennials.” Don’t forget, this is the same author that just claimed millennials save more than other generations.
The take away (besides don’t print fake news): don’t make your decisions based on what other people are doing (or claim to be doing). Figure out what quality of life you want during retirement (i.e., how much you want to live on each year), and then figure out how much you need to start saving now to get there. My book helps you figure out how to do that. The important part is to start now. Compound interest isn’t something you get back later.