American millennials think they will be rich

https://www.economist.com/graphic-detail/2019/04/22/american-millennials-think-they-will-be-rich

by pseudolus • 7 years ago

48 115 7 years ago

RickS3• 7 years ago

Paywall bypass: https://outline.com/bLtYCK

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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.

detaro2• 7 years ago

I'd suspect some weird selection like that, given that "average millennials are in a crappy economic situation" is a very widespread sentiment (which of course is also probably a biased impression)

randomacct38477• 7 years ago

If you make the median tech salary of $300k and live on a fraction of that it doesn’t take that long to save $1m...

Point is there’s no magic to becoming a millionaire if you have minimal expenses and single.

bredren• 7 years ago

Yes, you only need to make $300,000 a year. Not a big deal, really.

SketchySeaBeast5• 7 years ago

What percent of millenials are working in the tech sector and earning the median salary? Also, is that the median salary for all tech workers, or only Silicon Valley big company workers?

RickS3• 7 years ago

median tech salary of $300k

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.

seishan• 7 years ago

Where are you getting your median tech salary of $300k from? That figure seems awfully high to me.

loblollyboy3• 7 years ago

I really don’t think that’s the median anywhere

CryoLogic3• 7 years ago

You mean the median of 100k? https://www.bls.gov/ooh/computer-and-information-technology/...

Where do you get 300k from?

brootstrap• 7 years ago

Good points. I think if you are living a bachelor life, with a good tech gig paying six figures, yes you can get there by 40. If you max out retirement accts, live a decently modest lifestyle, have no debt. I bet you could hit 1million, if you are working from age 22-40.

rjf72• 7 years ago

There have been numerous other surveys throughout the years including by Gallup [1] that generally all find similar results. The Gallup poll, though, was less precise and simply asked if people expected to become "rich." A directly related little datum that shows up in numerous polls is that approximately 90% of Americans think they have average or above intelligence. Average in this case of course is going to be interpreted as median.

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...

ben7799• 7 years ago

It should be easy to be a millionaire by 40 in the Tech Sector, particularly if you don't end up with dependents, just save your money and don't live above your means. Almost all tech workers are paid way above the averages for the country, but we live above our means a lot of the time though.

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.

alexandercrohde• 7 years ago

Well, given compounding interest and inflation, is this so out of the question?

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.

varjag2• 7 years ago

A million in 2050 wouldn't take you nearly as far as today.

ivalm7• 7 years ago

10k/year contribution inflation adjusted with 2% inflation and 9% return (pre inflation) over 30 years is 1.78mil, or 984k in today's dollars. 15k/year contribution inflation adjusted results in 2.675mil, or 1.477mil in today's dollars.

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.

loblollyboy3• 7 years ago

30 years in this box so I can be rich and decrepit. The American dream!

Glyptodon• 7 years ago

Around 50% of the US working population earns $30,000 or less a year. Good luck saving 10k or 15k a year at that income level.

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.

hoopleheaded• 7 years ago

Median household income is nearly twice median individual income (approx 31k vs approx 57k). Households frequently have two earners.

mars4rp3• 7 years ago

This is the reason why american people don't vote for more taxes on the rich, illusion that someday they will be rich too.

working great for the people with money who created this illusion!

charliebossy• 7 years ago

what an absurd thing to say

happytoexplain• 7 years ago

Why? I've heard this sociological theory plenty of times. I don't know that there's any data for it, but on the other hand, it seems far from the category of garbage one might reasonably dismiss out of hand as "absurd".

munk-a5• 7 years ago

What an absurd response! The chance that a random person on the street in America is a billionaire is currently 0.00000212036%. It is absurd for anyone to think they'll win that lottery chance (especially since the acquisition of wealth is correlated highly with... already having wealth)

danhak• 7 years ago

Steinbeck believed as much:

"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."

dang• 7 years ago

Maybe so, but when commenting here, please try to include information that readers can learn from. Even when the comment you're replying to wasn't substantive.

https://news.ycombinator.com/newsguidelines.html

daenz• 7 years ago

This is the reason why american people don't vote for more taxes on the rich, illusion that someday they will be rich too.

Source?

spaceheretostay• 7 years ago

There's no source because it's false. First, Americans do vote for more taxes on the rich, by-and-large. And second, those that vote against taxes for the rich are usually basing their votes on incomplete or otherwise factually wrong data.

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.

WalterBright9• 7 years ago

Is it? Maybe many people realize that the consequences of heavily taxing the rich will fall on themselves as well. For example, those people will have correspondingly less money to invest, and investment produces jobs.

svachalek• 7 years ago

Governments and low-net-worth individuals spend every penny they have, which keeps the economy moving, which creates jobs. The idea that giving all the money to a few individuals to hold will work out better for everyone is very hard to rationalize, although it's understandable they like to repeat that notion.

rayiner2• 7 years ago

Americans do vote for more taxes on the rich: https://stats.oecd.org/index.aspx?DataSetCode=TABLE_I7.

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.

huffmsa3• 7 years ago

This is nothing new. Americans have always considered themselves temporarily poor.

And while many don't become fantastically rich, there's still a huge amount of turnover at the top levels of wealth between generations.

krona• 7 years ago

Indeed, in the US 12% of the population will find themselves in the top 1% of the income distribution for at least one year.

(https://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-...)

RickS3• 7 years ago

12% of the population will find themselves in the top 1% of the income distribution for at least one year

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.

notacoward2• 7 years ago

GP was talking about wealth, not income. There's some room to argue whether a 12% figure for income represents high economic mobility. There's absolutely no room to argue that the much lower number for wealth is anything but a disgrace.

giggles_giggles• 7 years ago

This old trope again? Being a millionaire isn't even rich in many parts of the US anymore -- just look at Silicon Valley as an example. A million dollars gets you, what exactly in terms of housing there?

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.

idlewords• 7 years ago

I never understood the "housing here is expensive so I'm not rich" argument. $500 only gets you a small hotel room at the Ritz-Carlton; that doesn't mean that $500 isn't a lot of money. It just means you elected to pay a lot for something other people get for less.

notacoward2• 7 years ago

still a huge amount of turnover at the top levels of wealth

That's so far from being true that it's hard to assume good intent.

Lowkeyloki2• 7 years ago

I don't know why the article is picking out millennials (other than that it's a popular tactic in the news media). You can replace the phrase "American millennials" with "Americans" in the headline and it will hold true.

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.

huffmsa3• 7 years ago

I don't know why the article is picking out millennials (other than that it's a popular tactic in the news media).

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.

modzu• 7 years ago

agreed about abusing the millenium term. whatever gets clicks...

but is that just another way of saying americans have hopes and dreams?

WalterBright9• 7 years ago

Even if the odds are against them, people like having the possibility of getting rich.

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?

MBCook• 7 years ago

They tend to vote against their own interest because ‘one day’ they’ll have more money and what they’re voting for will benefit them ‘then’.

WalterBright9• 7 years ago

I'm not so sure it's against their self interest. Crushing taxes on the wealthy makes a country poor, and that hurts everyone via slow, stagnant economies.

mistermann• 7 years ago

They tend to vote against their own interest

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-...

antt2• 7 years ago

Because the more people do this the more the economy tanks. The only reason why capital accumulation works is because most people don't do it.

Or more simply, if the economy grows at 2% any investment that grows faster than that will crash.

loblollyboy3• 7 years ago

I wish they had done something like 20-25 and 30-35 instead of 20-35 and 25-35.

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

kache_• 7 years ago

I think you're vastly overestimating how much people go to college - probably due to anecdotal experience.

hammock• 7 years ago

For what it's worth, only about a third of Americans age 18-22 are enrolled in college.

moosey• 7 years ago

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.

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.

DeonPenny• 7 years ago

Definition of rich change base on relations. Growing up I thought 70k was rich. Like beyond so. I would question if they think they would be relatively rich.

antisthenes• 7 years ago

Depending on the years you grew up in, 70k was rich.

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.

astrodust4• 7 years ago

The sad truth here is that "millionaire" doesn't mean a damned thing these days. In many cities a crappy crack den looking house in a terrible neighborhood costs more than a million dollars.

ivalm7• 7 years ago

Not really. Even in bay area there are plenty of places that are better than crack dens for 1mil. But yes, a few places in the world are very expensive.

IshKebab• 7 years ago

I'm guessing you are a programmer of some sort though, and therefore easily in the top 10% of incomes, so I don't think you can conclude that "it is very likely that a huge number of millenials will be millionaires" from your experience. (Assuming "huge" number means more than 1/5th, and we are talking 2019 dollars)

opportune3• 7 years ago

Having 1 million dollars at one point in your life (probably near retirement), after 30-40 more years of inflation, is probably pretty realistic. That will just be a regular lower middle class retirement, maybe not even enough to pass on to your kids but enough to get by. 2% annual inflation compounded over 35 years means that 1 million in 2054 will be about equivalent to $500k now. Which in most of the country is basically a paid off, middle income house and a few hundred thousand more in savings.

rootusrootus4• 7 years ago

I think $1M would qualify much better than lower middle class retirement. I'd bet a good chunk of the middle class is going to end up retiring on social security.

opportune3• 7 years ago

I wouldn't really call that middle class then, but maybe

cimmanom• 7 years ago

Assuming social security still exists for millennials.

antt2• 7 years ago

I'm a millionaire, largely because I own a house. If this is the dream life we have made a huge mistake somewhere.

amelius• 7 years ago

Did they ask how millennials think to achieve this?

CM30• 7 years ago

Obviously the basic gist of this isn't a new thing, as said in other comments, Americans (and likely many other country inhabitants) have considered themselves temporarily poor/embarassed millionaires/whatever for decades/centuries.

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.

theandrewbailey• 7 years ago

Then there is mum and dad: even if they don’t become millionaires, millennials will one day inherit from their parents, and that may help redress their relative poverty.

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.

acconrad• 7 years ago

The term "millionaire" is very dated.

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.

sct202• 7 years ago

I wouldn't be surprised, if a lot do. Just based on my friend group, a lot of people/couples are doing really really well and could easily hit a million in the next decade+ (and I suspect a few already have) if the stock market doesn't implode.

3xblah• 7 years ago

In the summarising the results of the TD Ameritrade survery, there is a "Q" number in the bottom left of each results page, e.g., "Q300".

What does this represent?

mnm1• 7 years ago

Of course they do. This has been part of the culture for generations. It's an ongoing delusion that fuels the inequality and lack of social services and keeps most people poor while the rich get richer. It's exactly this kind of delusion that the rich spread to keep people from questioning and changing what's currently going on. Americans are known for their stupidity and this is definitely an example of that.

RickJWagner• 7 years ago

Crazy. Wealth is certainly within reach of most people, but it requires discipline and a long, long-range saving plan.

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.

JohnTHaller• 7 years ago

Narrator: They won't.

American millennials think they will be rich

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