A study released this month by Wells Fargo (No. 12 on the 2016 DiversityInc Top 50 Companies for Diversity list) found a gender wage gap, “unmanageable” student loan debt and racial disparities when it comes to wealth and salaries for millennials.
The report, “Majority of Millennials Say They Won’t Ever Accumulate $1 Million,” reveals that 64 percent of working millennials ages 22-35 do not believe they will save $1 million for their retirement savings. And, just as in generations before, inequalities emerge when numbers are broken down by gender and race.
Millennial Women Earning Less Than Men
The median salary for millennial men is $39,100 — compared to $28,800 for millennial women and $33,800 for the general millennial population. Therefore, the study estimates that the wage gap is larger for millennial women than for the general population. According to Catalyst, in 2014 women earned an estimated 79 percent of men’s salaries annually.
As income inequality trickles down to yet another generation of working women, the side effects do as well, the study reveals:
|Report living paycheck to paycheck||43%||54%|
|Finances stretched “too thin” to save for retirement||50%||61%|
|Don’t believe they can accumulate $1 million in savings||56%||73%|
|Have already started saving for retirement||61%||56%|
|Average percent of income saved||7.3%||5.7%|
The persistence of the wage gap makes it that much more important for women in particular to save for retirement, according to Joe Ready, director of Institutional Retirement and Trust for Wells Fargo.
“The wage gap between male and female millennials clearly exists, and it’s a real issue,” he said. “It’s important that young women focus on saving and investing now, as this strategy will help put them in good standing for their retirement years.”
Hispanics Earn Less, Support More People
The racial gap — illustrated in salaries of all generations — persists among millennials as well. Hispanic millennials reported an annual income of $31,100 — 92 percent of the general population.
Hispanic millennials reported less student loan debt than the general population. The median for Hispanics is $10,267, compared to $19,978 for everyone else.
However, Hispanics reported other financial obligations different from the general population of millennials — as well as increased optimism:
“Nearly a third (30%) of Hispanic millennials say they are currently providing financial support to two or more generations of their family, versus 14% of general-population millennials. Despite this difference, Hispanic millennials are more optimistic about surpassing the lifestyle of their parents, with 63 percent saying they will ‘do better than their parents,’ in comparison to 49 percent of general-population millennials.”
In addition, the study found some differences between Hispanics saving for retirement versus focusing on daily finances:
|Hispanic Millennials||General Population Millennials|
|Have a monthly budget||66%||54%|
|Are saving for retirement||52%||59%|
|Consider saving for retirement a “high priority”||42%||35%|
While more Hispanics consider it important to save for retirement, they are not saving at the same rate as millennials overall.
In addition to the gender and race breakdowns, the survey also found:
• 75 percent of millennials have “unmanageable” student loan debt
• 41 percent have not started saving for retirement; of this, 64 percent say they are not earning enough money to save
• The majority of millennials are hesitant to invest their money for fear of losing it in the stock market
• Nearly three-quarters of millennials do not believe social security will be available to them when they retire
• Only 44 percent of millennials say they are “fully employed in their preferred career”
• 63 percent of millennials value having a job they love over a high salary with benefits
• 40 percent would like to work for one employer over the course of their career
Is $1 Million Attainable for Women and Hispanics?
Despite the racial and gender gaps — and low level of confidence among millennials overall — Ready believes saving $1 million for retirement is an attainable goal. The key is to start saving early and to slowly increase the amount overtime.
“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,” he said.
But this assumption may not apply to all millennials equally, based on the numbers. The study provides a mathematical breakdown for how millennials can earn $1 million over the course of their careers. However, the equation assumes they are starting with a $32,000 annual salary at age 25 — which is below the median salary reported for women and Hispanics. Further, the equation “assumes the earner receives a 2% salary increase annually” — which leaves women and Hispanics on an uneven playing field for the duration of their savings journey.