American millennials think they will be rich
economist.com
economist.com
And while many don't become fantastically rich, there's still a huge amount of turnover at the top levels of wealth between generations.
(https://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-...)
That is just wild. I wish they dove deeper into the data here. The top 1% of earning, based on a quick google, is 1.3m/yr. That's a lot! Are there, say, estate windfalls pushing people around to cause some of those blips?
Also, this article fails to separate income from wealth/assets, which seems to be a common pitfall in this kind of conversation. Many of the people with the most wealth are not those with the most income. So while there appears to be lots of income volatility, I would be interested in seeing the same thing for wealth over time.
I would give citations but I've forgotten where I heard this.
Most of the millionaires that exist today are older folks that have paid off their homes, and most of that wealth is in their homes. As the article states at the end, Millenials will inherit much of that wealth as the Boomers die, just in time for articles like this to come out about Gen Z.
[1] Assuming your labor isn't portable - if your labour is portable (i.e. you can move to rural montana and keep your job or a similarly paying one) then you're making an active choice to pay a high cost of living for the environment you're living in, many people can't remote themselves without cost so to continue to earn at the rates they're earning they need to stay put.
That's so far from being true that it's hard to assume good intent.
I suspect most of us on HN are a bit optimistic about the definition of middle class. Maybe we identify socially as middle class. But unless the numbers are lying, a huge chunk of America is in a much tighter financial situation.
In classical analysis of capitalist economies (starting with, but not limited to, the socialist critics that first identified “capitalism” as a thing) the “middle class” isn't middle in the sense of including the median person, but in being between the capitalist class (that derives support through applying rented labor to capital they control) and the working class (which derives support through labor rents from capitalists), and includes people whose support comes from a mixture of capital and labor, most typically the yeoman farmer or independent tradesman who primarily applies his own labor to his own capital.
Boomers (in general) have as little saved and are in as much debt as their kids. Mcmansions, healthcare, and luxury cars aren't cheap. I (gen Y) am not counting on any Social Security or inheritance.
It was first coined in the 1700s and first popularized in American culture as early as the 30s, so really when people envision that "millionaire" from their childhood or from their parents' minds they're really thinking of a decamillionaire in today's dollars.
When you frame it like that, I'm not sure if any millennial thinks that will happen.
At least I keep hearing I need a net worth > 1 million to retire. If one puts away 10-15k a year for just 30 years, plus interest that would get you there comfortably.
If we reduce pre-inflation return to 7%, while maintaining 2% inflation target, we get $0.685m and $1m.
The 2% inflation makes it that over 30 years your total contribution is $405k at 10k/year and $608k at 15k/year.
9% pre inflation is insane, and 7% is too. If you can do that consistenly, you will be a billionaire hedge fund manager. Ten year treasury bond yields 2.59% per year, anything above it is risky.
Sure, you can stuff 100% of your savings into S&P500, but then you will have to deal with unpredictable 20-40% drawbacks, which take years and years to correct. Last recession S&P500 basically halved.
Average annualized return from s&p over past 90 years is 9.8%. Both 9% and 7% were chosen to be below average to account for some amount of lower risk assets in the portfolio. Even with the "great recession" the peak value from 2008 was recovered by 2011 (for spx). When you retire you should have a few years worth expenses in low risk assets, which will be the source of early withdrawals in case of stock market crashes at retirement.
Tangentially, at the typically suggested 4% yearly withdrawal level you'd need more like $1.5 million to retire at the ~$60k median income level.
Also sort of unrelated I thinks it's interesting that about 50% of people can earn under $30k, but median income is still twice that.
But part of me wonders whether social media and the internet may have pushed the effect even further. Rich people are seriously overrepresented online, and the rise in social media influencers may make people feel like that's the norm for society nowadays, that everyone has the coolest tech, the most up to date fashion, the fanciest house/apartment, a huge online following and a picture perfect lifestyle. Hell, I even remember articles saying how many kids saw Twitch streaming/creating YouTube videos being their most likely career choice.
Just feels like social media and the internet makes you think that everyone is raking in it and living a dream lifestyle, and that logically you should be destined for the same thing.
I suppose many of those surveyed are watching the 'FIRE' folks. I think those people are high-salary people (usually), also combined with very disciplined savings and investment.
It just won't happen for wishers. Only for doers.
Of course 20-25 year olds are going to pull the median down. They’re still in college! But yeah 25-35 is still pretty low
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> MORE THAN half of American millennials, the generation of people born between 1981 and 1996, believe that they will one day be millionaires; one in five think they will get there by the age of 40.
This, to me, is absolutely insane.
Given that it's from a survey by Ameritrade, is it possible that the survey strongly self selects for fiscally healthy people (proximity to ameritrade is probably a strong signal here), and who understand that you can be a paper millionaire with, say, one really good property and a modest retirement account?
I somewhat hope so, because if this means "half the people who work at chipotle expect to be millionaires" then that's admirably ambitious but a little miscalibrated.
Hell, I've got a decent tech salary and my brother's running a healthy lifestyle business. I wouldn't say with certainty that either of us are going to become millionaires, despite being unusually well positioned to do so.
What happens when these people's dreams collide with reality? Are people content to drift through life saying "any day now, things will turn around and make me rich..."?
Nevermind that being a millionaire isn't that important. I'd take median wealth and top decile meaning over median meaning and top decile wealth any day.
Point is there’s no magic to becoming a millionaire if you have minimal expenses and single.
Mean is probably better than median here, right? Because salary isn't quite a normal distribution. The high end is super high. 300k is normal for FAANG, but that class of tech employee is in the top 10% of the wider tech salary pool, at least.
Interesting that you call out being single. I've had the opposite experience – the trick seems to be a salary like that and a spouse that is at least pulling down a normal salary as well. If they're also making engineer money, then you're super set. If I'd have been splitting rent and groceries for the past 10 years, my finances would look a lot better.
That's not an excuse, I could have gotten a roommate with the same effect. Just to say that it seems being single raises expenses because you lose the little collaborative economies of scale.
Where do you get 300k from?
When I went to college only a few years ago the best paying jobs in consulting and banking were largely gated by what school you went to. Now students from “non-prestigious” schools or no formal schooling at all have a good chance at earning that much.
I don't necessarily think it's arrogance so much as delusion. For instance a person paying tens of thousands of dollars for a degree of minimal utility obviously knows that this is a very bad decision deep down, but it's something they want to do - or perhaps they feel like they could not cut it in something like a STEM field. So the rationalizing kicks in. Maybe they'll become a lawyer, an author, or a speaker. They'll make millions! It'll be great! Of course it's just cognitive dissonance and self delusion.
[1] - https://news.gallup.com/poll/7981/Half-Young-People-Expect-S...
If you look at the last 20 years if you started out as a software engineer around 2000 you probably made a lot less than $100k when you started out but you should be making more than that by the time you're 40, it should average out to around $100k.
So if you average to $100k for 20 years that's $2 million in earnings. Say you averaged 20% taxation you're down to $1.6 million. If you had $100k in student debt, which would have been a ton if you graduated in 2000, you're still at $1.5 million.
There are families which live on way less money than this, if you don't have a family and you're a tech worker you should have been able to save $1 million in that 20 years if you were maxing your 401k and being otherwise financially prudent and not living too much of a consumer lifestyle. The key thing here is if you were saving right from the start your investments have already had 20 years to grow.
I see co-workers buying new cars every 2-3 years and going out to eat every day, paying huge amounts of rent, etc.. buying every new video game that comes out at $50-60/pop, taking international trips all the time.
It's easy to spend money, but if you don't it's also easy to save it.
Even if you do have a family.. you are probably not getting married to someone making minimum wage, now you probably have 2 salaried workers earning more than the average/median, even easier to save.
The odds aren't even that bad, if you read up on how to do it, develop a plan, and stick to it.
Why take that away from people?
It's interesting how so many people seem to believe voters get a ballot with multiple line items on them, one of them being "Raise taxes on the rich". Or if that's not the root belief behind "people voting against their interest", that economics is the prime motivator for all voters.
Some other theories:
https://mediahub.unl.edu/media/8546
https://www.theguardian.com/society/2012/jun/05/why-working-...
Or more simply, if the economy grows at 2% any investment that grows faster than that will crash.
What does this represent?
I'm 40, I have a good job, and I will one day be a millionaire.
I will never be rich, or the possibility is so impossibly low as to be laughable.
Both of these statements are true, and that is one of the fallacies that the paper is making. It is very likely that a huge number of millenials will be millionaires, given that our current economy is capable of running as-is for another 40-50 years, simply due to pressures from inflation.
I don't think that our economy will run as-is for the next 40-50 years, of course. We will do something about Climate Change, or it will do something about us.
Inflation and skyrocketing cost of housing and health care made sure that 70k isn't rich anymore, especially if that's a household income for a family.
Median home price in San Jose is $1054k https://www.zillow.com/san-jose-ca/home-values/
Median home price in San Bruno is $1089k https://www.zillow.com/san-bruno-ca/home-values/
Yes, Menlo Park/Palo Alto/Mountain View are expensive but they don't fully define Bay Area.
The cities I showed and more are definitely within Bay Area. And their median house is not a "crack shack."
Those aren't too hard to find when the median home is a million dollars.
I'm reminded of something John Oliver said during a segment of Last Week Tonight some years ago about the lottery. It seems that there are only two classes of Americans. The rich and the soon-to-be rich. At least that's what Americans seem to believe.
That's the only reason. The Economist is owned by aristocratic Boomers and written by Gen Xers. They're just salty they were born too late to be the Greatest and too early to go to Mars.
but is that just another way of saying americans have hopes and dreams?
working great for the people with money who created this illusion!
e.g. "Should I pay to arrest/convict/incarcerate the person who stole my phone" vs. "Should my cancer be cured without bankrupting me"
#1 seems to get universal traction, as does #2 in pretty much every country who could fund it, apart from the US.
A common misconception is "somebody has to win, why not me?"
I'll clarify a bit, being a millionaire in no way implies that you're rich, inflation is a thing and the vast majority of millennials will be poor.
"I guess the trouble was that we didn't have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist."
often misquoted as "Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires."
Source?
Nearly all the people in the USA would be much more likely to become millionaires if overall taxes were higher for the rich. Less worrying about healthcare, more ability to take business and personal risks, more baseline tools to build ontop of (like roads, etc). Those that want reduced taxes on the rich would be directly harming their own ability to ever become rich in the first place.
Some people are so dead-set against new taxes that even a one penny levy per year to do something vital is too much government overreach.
It doesn't create jobs when the money is taxed away from those who invest in the businesses. High taxes correlate with low economic growth.
> giving all the money
People create wealth, it is not given to them.
> to a few individuals to hold
Wealthy people don't hold money. They invest it. Even money sitting in a checking account isn't actually there - the bank loans it out.
What does government do with the money? The money is only productive in the billionaires bank account?
"People create wealth, it is not given to them." People take wealth, if Bezos has $150B, he didn't create it out of thin air, he took the money out of lots of mom and pop shops that don't exist anymore. Did he actually created jobs or destroyed jobs?
Mostly dissipate it. Your argument rests on the notion that government invests money more productively than wealthy people do. This is pretty hard to support, since the wealthy are wealthy because they are very good at productively investing the money.
Bezos did create his wealth, in large part from the efficiency of getting products to customers, which is why customers preferred to shop at Amazon. They get a better deal.
Bezos created jobs - unemployment rates are very low.
I can't argue with this!
The average top statutory rate (federal + state) is 43.7% for 2018, slightly on the lower end of a cluster ranging from Switzerland (41.7%) to Ireland (48%), including places like Germany, Italy, Spain, and the U.K.--which together have 63% of the EU's population. Taxation of rich people in the U.S. is squarely within the mainstream for developed countries with robust welfare states.
Where the U.S. departs is taxes on everyone else. Compare the tax revenue statistics of the U.S. (https://www.oecd.org/tax/revenue-statistics-united-states.pd...) with those of Spain (https://www.oecd.org/tax/tax-policy/revenue-statistics-spain...). Spain and the U.S. have almost exactly the same top marginal rate (43-44%). Spain takes in a much larger share of GDP (33%) as taxes versus the U.S. (27%). What is the difference?
- Spain gets slightly less taxes from corporations (7% versus 8%)
- Spain gets less taxes from income taxes, which are progressive (21% versus 40%)
- Spain gets way more taxes from social security contributions, which are regressive because in both countries they are subject to a cap (34% versus 24%)
- Spain gets way more from excise taxes, which are regressive (29% versus 17%)
Imagine if the U.S. wholesale adopted Spain's tax system. Total tax revenues would go up by $1.28 trillion per year. But income taxes, paid primarily by the rich, would fall from $2.1 trillion to $1.37 trillion. Excise taxes, paid primarily by the poor and middle class, would go up from $890 billion to $1.89 trillion. Social security taxes, paid primarily by the middle class, would go up from $1.26 trillion to $2.22 trillion.