Faced with student loan payments and a lackluster jobs market, Millennials—adults under the age of 35—are spending more than they’re earning today, with a savings rate of negative 2 percent.
According to a recent Wall Street Journal article, a Moody’s Analytics study has found that Millennials are saving far less than other generations. The savings rate for those between the ages of 35 and 44 is 3 percent; 6 percent for 45- to 54-yearolds; and 13 percent for people 55 and older.
The negative 2 percent figure also represents a significant drop from previous years.
After the recession, Millennials had a savings rate of 5.2 percent in 2009, briefly surpassing the savings rate of Gen Xers.
Now, however, it appears that Millennials are substantially worse off than the previous generation. According to the article, in 1995, Gen Xers were earning wages that , when adjusted for inflation, were 9 percent higher than Millennials’ wages are today. Additionally, their median net worth was $18,200, compared to just $10,400 for the average Millennial today.
Why the disparity? Millennials are still struggling with an unfriendly job market.
While the national unemployment rate is now under 6 percent, it’s 6.2 percent for those between the ages of 25 to 34 and 10.5 percent for 20- to 24-year-olds. Student loans are also a challenge. In 1995, Gen Xers had median student debt of just $6,100.
Today, the median is $17,200.
Data cited in the article also found that Millennials are less likely to own a variety of investments and investment accounts—including certificates of deposit, savings bonds, stocks and retirement accounts—than Gen Xers were at the same age.
This could signal an opening for producers. There are plenty of financial products available to help encourage Millennials to invest for the long term, especially for major milestones such as retirement and home ownership.
Indexed universal life insurance, for example, has the potential to build cash value over time that can be tapped¹, less any surrender charges, for future expenses or emergencies.
For more advice on selling life insurance products to Millennials, contact Imeriti today at 800.921.3100 or [email protected].
¹ Withdrawals can reduce cash value that can cause a reduction of death benefit.
Cash-value withdrawals are not always received income-tax free. For example, if a withdrawal is taken in the first 15 years of the policy and the withdrawal causes a reduction in the policy's death benefit, some or all of the withdrawn cash could be subject to taxation. Withdrawals are treated as taxable to the extent that they exceed premium basis in the policy. Withdrawals that reduce cash surrender value can cause premiums to increase in order to maintain the same death benefit; otherwise, the policy could lapse. If withdrawal is classified as a MEC, the withdrawal is generally taxed according to the rules applicable to annuities - cash disbursements are considered to be made from interest first and are subject to income tax and possibly a 10% early-withdrawal penalty is the policy owner is under age 59.5 at the time of the withdrawal.