Fifty-nine percent have started saving, but 41% have not, with 64% of this group saying the reason is simply because they don’t make enough.
“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,” says Joe Ready, director of institutional retirement and trust at Wells Fargo. “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.”
Wells Fargo projects that if a Millennial age 25 earning $32,000 starts saving 5% and increases their savings rate by 2% a year up to a 13% threshold, they could have $1 million by the time they are 65. This assumes that they get a 2% raise every year and earn a 7% return.
Of the 64% who view a $1 million nest egg as an impossibility, their median income is $27,900. Fifty percent of this group has started saving for retirement, 37% are putting away more than 5% of their income and 7% are saving more than 10%.
Of the 32% who do expect to achieve a $1 million retirement nest egg, their median income is $53,000. Seventy-seven percent have started saving for retirement, with 66% of them putting away more than 5% of their income and 28% more than 10%.
The study also found that 34% of Millennials have student loan debt, which averages $19,978. Seventy-five percent of those who have student loan debt say it is “unmanageable.” Nonetheless, 70% of them are saving for retirement at an average savings rate of 5.5%.
NEXT: Challenges for Millennial womenAs with other generations, Millennial women face more financial challenges than their male counterparts. Their average income is $28,800, compared to $39,100 for men. Fifty-four percent of Millennial women say they live paycheck to paycheck, compared to 43% of Millennial men, and 61% of Millennial women say their finances are stretched too thin to save for retirement, compared to 50% of men. Perhaps more tellingly, 73% of women in this demographic group do not believe a $1 million nest egg is attainable, compared to 56% of men, and only 56% of women have started saving for retirement, compared to 61% of men.
“The wage gap between male and female Millennials clearly exists, and it’s a real issue,” Ready says. “It’s important that younger women focus on saving and investing now, as this strategy will help put them in good standing for their retirement years.”
Eighty-five percent of Millennials view saving for retirement as an important step towards becoming a financial adult, and 82% say that witnessing people who are comfortably retired makes them want to save more for their own retirement. However, less than half, 45%, regularly review their finances, and only 54% have a budget.
Millennials are also equity-shy. Fifty-nine percent say the current economic climate makes them uncomfortable about investing, and 52% worry about the volatility in the stock market depleting their savings. Seventy-four percent do not believe Social Security will exist by the time they retire.
GfK conducted the survey for Wells Fargo among 1,005 Millennials in April.