January 26, 2018

It Should Not Surprise Us that 1 in 6 Millennials Have Saved $100k

Recent headlines are telling us that Millennials: 1 in 6 now have $100,000 socked away    And when reading that I wonder 'why is this news'?        Will it be followed by reports that 1 in 50 Millennials are millionaires or that 1 in 2 millenials have over $50k in their 401k?   Cause I suppose both those are true too.

I don't think its any surprise at all that 1 in 6 millennials have over 100k saved.   Theres a few reasons why it should be expected.

Net worth and savings balances increase with age and millennials are aging.   

As millenials get older it is really just a given that their savings will grow on average.  This isn't any kind of generational phenomenon its just a simple reflection of peoples savings growing over time.

In the survey of consumer finances the mean holdings of financial assets by age in 2013 was :

Age of head (years) Mean  $k
Less than 35 38.3
35–44 148.8
45–54 253.1
55–64 411.2
65–74 566.1
75 or more 314.6
Note this is just among households who have financial assets but >90% do for every age group.
This kind of distribution has held over time too so you could see similar growth of assets by age in previous years.    As you can see there the jump from the under 35 to the 35 -44 age groups crosses the $100k mean.   

If you make a decent amount its not so hard to pile up $100k over a few years. 

I used one of DQYDJ.com's nifty calculators to find the income ranking for people age 18-35 and it shows that ~18% of households with heads in that age group make $100k or more.     If you are in your late 20's or early 30's and make 6 figures then its not too hard or unusual to have piled up $100k across your savings.   A 5% 401k investment and employer match would get you there.

People also inherit money.   

I found this interesting BLS paper with a lot of data on inheritances :
Inheritances and the Distribution of Wealth Or Whatever Happened to the Great Inheritance Boom?
Its a bit old but the figures give us a reference on how common inheritances are and how much people receive.   From 1989 to 2007 about 12% of people under age 35 inherit or receive gifts that average ~$146k.  The average skews high and the median value was $28k.     But still thats a sizable chunk of people who receive large gifts or inheritances.    If the median is $28k received by 12% then 6% of people got over $28k.   I'd assume that 1-2% of people inherit over $100k but that is more an educated guess.

I think that instead of proclaiming a sense of surprise that the younger generation has saved money they should have honestly stated 'hey we shouldn't generalize entire generations'.

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