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And Now The Bad News: Millennials Will Need To Withdraw $270K Per Year From Their Retirement Accounts

Tyler Durden's picture




 

Via ConvergEx's Nicholas Colas,

Which profile fits a money manager’s ideal customer – a “Mass affluent” 50-year old or a dead broke 20-something? The wealth management industry would do well to run the numbers, because it is the latter that will generate a larger fee stream over time. 

 

How can that be? The short answer is that millennials will live longer, require far more in retirement savings, and use more high margin investment products for longer than their parents’ generation.

 

This simple calculus seems beyond the reach of an industry that still commonly features high minimum balances for advisory services and does little in the way of outreach to younger customers. So called “Robo-advisors” have begun to gather up this group of younger investors, but there is still plenty of time for the traditional money management industry to service this next, much larger, wave of customers. 

Note from Nick: I am 51; Jessica is 21. I have a lifetime of savings, equity in a house, and disposable income to invest. Jessica has a lot of talent and a few thousand dollars saved from her 2 years of full time work. And when I see advertisements for money managers, they all clearly target me. Turns out that is a bad strategy, because the industry will make a lot more money from Jessica than they ever will getting my hard earned shekels to manage.  Read on for the whys and wherefores….  And just how much more valuable millennials are than old folks like me. 

Are you more afraid of death or poverty? This may seem like an odd question with an obvious answer: the Grim Reaper should engender more fear than an overdraft charge. Surveys, however, surprisingly suggest that poverty weighs heavily indeed on many people’s psyches in light of longer life expectancies and uncertainty about Social Security payouts. Consider these findings:

Sixty-one percent of respondents to a 2010 Allianz survey of 3,257 people said “they were more scared of outliving their assets than they were of dying”.This figure increased to 77% for those between the ages of 44 and 49, and as high as 82% for those “in their late 40s who had dependents”.

 

Moreover, 58% to 60% of all participants “worry about longevity”. One cause of financial stress relates to Social Security benefits: “39% feel they're more likely to be hit by lightning than to get their full due from Social Security. For middle-class respondents, this number rose to 56%.”

 

A 2014 survey conducted by Wells Fargo of 1,001 middle-class Americans (aged 25-75) said “they would rather ‘die early’ than not have enough money to live comfortably in retirement”.

 

Despite this fear, “61% of all middle-class Americans, across all income levels included in the survey, admit they are not sacrificing ‘a lot’ to save for retirement”. Younger adults either don’t save or push it off: “More than half (55%) … say they plan to save “later” for retirement in order to ‘make up for not saving enough now.’ For those between the ages of 30 and 49, 59% say they plan to save later to make up retirement savings, and 27% are not currently contributing savings to a retirement plan or account”. Yet, “72% of all middle-class Americans say they should have started saving earlier for retirement, up from 65% in 2013”.

This misguided plan to save later as a means to make up for lost ground in the present circumvents the benefits of compounded returns over time. With that said, young adults are at a disadvantage when taking it upon themselves to hire a financial advisor at a major financial services firm. Minimum investments typically start at $25,000, a large lump sum for millennials trying to pay off record levels of student loan debt. Automated financial advisors have disrupted the banking industry by offering passive money management with lower fees and low/or no minimum investment. The difference between a traditional wealth management firm and robo-advisors boils down to the latter’s ability to realize the future potential earnings power of millennials despite their current cash-strapped state. There’s a lot more to the model that that. No human advisors, a different investment approach, that appeal to tech-savvy millennials. 

Now, it is fair to ask why the traditional money management industry should care about a bunch of millennials with minimal savings, lots of college debt, and uncertain economic futures. The answer, which we will outline in the remainder of this note, is that they are actually worth more today than a typical 50 year old “Mass affluent” customer. We undertook an exercise to compare the current value of millennial customers versus baby boomers. Our findings showed that the industry’s focus on Baby Boomers is shortsighted, and a typical millennial will be a far more profitable customer over time. Here’s an outline of the math:

Assuming 2% inflation – the Federal Reserve’s current target – over the next 50 years, or when millennials enter retirement, they will need to withdraw about $270,000 per year from their retirement plans. That’s the equivalent of $100,000 today adjusted for inflation 50 years from now, as we assume millennials will retire at age 70. By contrast, the remainder of baby boomers will likely retire at age 67. Adjusting for 2% inflation for the next roughly 15 years off a $100,000 base today suggests they need to withdraw about $135,000 per year in retirement.

 

Given these withdrawal figures, we also took into account that millennials will likely live until 100, and baby boomers until 85. Therefore, the former cohort will need to invest their savings to support withdrawals of $270,000 each year for 30 years, and the latter group $135,000 for roughly 18 years.

 

In the case of millennials, we fully invested their savings in equities from the age of 21 to when they retire at 70. We also applied a 7% annual growth rate in equities and accounted for a 1% management fee. Come their 71st birthday, we split their portfolio into a 50/50 stock to bond mix with an annual return of 7% for stocks and 3% for bonds. Rather than adding money, we adjusted for distributions of $270,000 per year.

In order to amass enough capital to keep our model millennial out of the poor house until age 100, we estimated a savings plan that gradually increases over the years as their earnings power grows. During the first 5 of the 50 potential years of work, millennials will need to save at least $1,000 annually, or about $83 per month. This may seem arduous currently in light of student loan payments in addition to other expenses like rent, but every little bit as early on helps in the future. This number must rise to $10,000 during the subsequent 5 years as their careers get underway, and $20,000 by age 31 for another 5 years. Once they reach age 36, millennials need to contribute $25,000 into their savings plans until retirement. This will leave them with about $275,000 at the end of their century-long lives.

As for baby boomers, we constructed a portfolio consisting of only equities from the age of 50 until retirement at 67.  We started them off with preexisting savings of $455,000. We also used the same management fee (1%) and expected equity returns (7% annually) as we did for millennials, and added $22,000 to the savings pot annually from age 50 to 67 (or the maximum contribution allowed into a 401k plan for that age and up). Accounting for a 50/50 split between stocks and bonds in addition to withdrawals of $135,000 during baby boomers’ 20 years of retirement, they’d end with just over $20 grand at age 85.

 

With a 1% management fee for equities and a 0.25% management fee for fixed income, millennials represent a fee stream totaling +$1.2 million customers for money managers in total terms, and +$450 K in current figures over their lifetimes of investing. By contrast, baby boomer customers will only earn the money management industry +$300,000 in total, or +$220,000 in today’s terms for the remainder of their lives.

In sum, financial services firms may not earn high fees during the beginning of millennials’ careers, but should appreciate the benefit of this cohort as customers in addition to baby boomers. They could gain more than $800,000 (+$200,000 today) in the long run by serving a millennial. We also recognize that the savings we attributed to the latter years of a millennial’s career exceeds the current annual maximum of $18,000 in a 401k plan. We expect this to lift in order to help millennials keep up with inflation and meet their retirement goals. In the meantime, automated financial advisors, such as Wealthfront and Betterment, will continue to build their product offerings in order to exploit these inefficiencies and scoop up millennial customers before they are worth traditional money managers’ time.

 

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Tue, 10/13/2015 - 16:03 | 6664008 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

I can't take much more of this.

Tue, 10/13/2015 - 16:05 | 6664016 Arnold
Arnold's picture

Ditto.

 

(beer me)

Tue, 10/13/2015 - 16:10 | 6664037 Uchtdorf
Uchtdorf's picture

Soylent Green. Problem solved.

Tue, 10/13/2015 - 16:12 | 6664047 Bilderberg Member
Bilderberg Member's picture

I think this is a typo, You mean "Withdraw 270K Per Lifetime" right??

Tue, 10/13/2015 - 16:17 | 6664078 The Pope
The Pope's picture

I just came here because the foto click bait chick was a NILF (Nerds _ I'd_ LikeTo)

Tue, 10/13/2015 - 16:19 | 6664090 cheka
cheka's picture

but but mish, denniger, dent....and other egg faces call for DEflation

 

Tue, 10/13/2015 - 16:25 | 6664123 N2OJoe
N2OJoe's picture

How much will we need at the current 10-12% per year inflation levels?

Tue, 10/13/2015 - 16:41 | 6664188 Save_America1st
Save_America1st's picture

oh, not to worry.  There won't be retirement like you all are thinking in the future where they might out-live the digi-life credits stored in their brain chips.

There will be "retirement" as in Logan's Run style retirement when they hit 30 years old.  Then the crystal in their hand will turn red and ZAP!, bitchez...you've been retired.

Tue, 10/13/2015 - 16:42 | 6664196 greenskeeper carl
greenskeeper carl's picture

270k per year huh? I'm a millinial. How many ounces of gold do you think that will be?

Tue, 10/13/2015 - 17:05 | 6664273 giggler321
giggler321's picture

Don't worry my millinial buddy, if death isn't on your mind as much as future income, hyperinflation is your friend!  That's probably just one gov payout cheque for a year, cough, month, cough, week, choke day...

Tue, 10/13/2015 - 17:48 | 6664396 Pure Evil
Pure Evil's picture

If the current track of the country is any indication, government corruption, endless 3rd world immigration, outsourcing of more jobs along with insourcing of foreign workers, authortarian police state, less and less liberties, then who in the hell will want to live to be 100?

Tue, 10/13/2015 - 19:05 | 6664611 tenpanhandle
tenpanhandle's picture

I didn't know that unemployment provided a 401K plan.

Tue, 10/13/2015 - 19:34 | 6664717 Lore
Lore's picture

Exactly. The writers of this report are screwing the proverbial pooch: "We also applied a 7% annual growth rate in equities..."  GOOD LUCK WITH THAT.  The private central bankers have laid groundwork for the biggest crash and real wealth destructoin in history, and you prattle about 7% annual growth?!  

The biggest pension funds are on the skids already. What's their methodology going forward - blood from stones?  Loaves and fishes?  (Why the hell do they keep buying shopping malls? Is there some big plan for mall-based affordable housing?) 

God damn it.  We used to worry about indebted boomers!  Millennials are TOAST.

Tue, 10/13/2015 - 19:58 | 6664839 Stevious
Stevious's picture

Millenials are tost, baby boomers are toast, GenX are toast.

I'm long Chicken coops.

Tue, 10/13/2015 - 17:50 | 6664402 NoDecaf
NoDecaf's picture

These guys are projecting 50 years out...meanwhile, Russian and US fighter jets are buzzing over Syria and the US Navy is steaming some targets towards China.

 

Tue, 10/13/2015 - 22:07 | 6665333 Obamamerica
Obamamerica's picture

about 3

Tue, 10/13/2015 - 16:44 | 6664204 Billy the Poet
Billy the Poet's picture

Carousel is a lie! The Fed is a lie! You don't have to die!

Tue, 10/13/2015 - 16:48 | 6664224 Save_America1st
Save_America1st's picture

carrousel's real man...check it out.  RENEW!!!!

 

https://www.youtube.com/watch?v=LSUAAKFLoL0

 

LOL

Tue, 10/13/2015 - 17:04 | 6664269 Captain Debtcrash
Captain Debtcrash's picture

As shown here millennials should be much more concerned about high asset prices rather than high education costs.  Even though high asset prices are much worse for millennials than education prices you would never know it if you paid attention to the main stream media.

Tue, 10/13/2015 - 19:18 | 6664657 AGuy
AGuy's picture

"How much will we need at the current 10-12% per year inflation levels?"

I think a single 100 Trillion Federal reserve note should cover it :)

 

Tue, 10/13/2015 - 19:57 | 6664828 Stevious
Stevious's picture

Do the math.  The author assumes about an 8% inflation rate.

At 11% it'll come out around $340k

Tue, 10/13/2015 - 16:26 | 6664130 MalteseFalcon
MalteseFalcon's picture

This article is BS.  Did anyone in 1980 know what the world would look like in 2015? 

No.

$270K a year?

Yeah if your annual salary is $400K.

Tue, 10/13/2015 - 19:08 | 6664620 tenpanhandle
tenpanhandle's picture

Maybe not but 2015 sure looks a lot like "1984".

Tue, 10/13/2015 - 17:36 | 6664371 CarpetShag
CarpetShag's picture

Not now, that's a tampon pack she's waving around.

Tue, 10/13/2015 - 16:28 | 6664145 ToSoft4Truth
ToSoft4Truth's picture

Withdraw 270K annually.

Max contribution is around 18K/19K a year.

Good luck.

Tue, 10/13/2015 - 19:55 | 6664817 Stevious
Stevious's picture

Awww...c'mon what are you a millenial?

Look through your change over the next month. I guarantee that you'll find a pre-1964 Jefferson nickle.  And I'll guarantee that nickle sitting in your pocket did buy, at one time, a standard candy bar (think Hershey's Chocolate, Three Musketeers, Snickers)...one nickel one candy bar. 

 

Now see what it buys?  You must add at least ninety-five more cents in one form or another, or more.  Many places charge $1.19 for the standard Hershey's bar.

So.......assume $15k average SS payout per year.  Minimum survival income is about 133% of Federal Poverty level which is about $28,500.  Deduct the 28,500 from the 15k = $13,500 shortfall. Now multiply by 19x (the rate currency has lost purhasing power since 1964)  Results = $256,000 per year, not far from the author's "$270k" per year. (Remember the author is hypothesizing 40 years into the future)

Though I'm not sure the correlation holds true. Since 1964 we've lost 95% of purchasing power.  So the question for you is:  What does the future hold?

a) More purchasing power loss than the past 40 years?  Or

b) Less purhchasing power loss.

If you cholse b) please, for God's sake tell me just why?  Are you thinking that our government will become MORE responsible.

 

Tue, 10/13/2015 - 20:02 | 6664071 LowerSlowerDela...
LowerSlowerDelaware_LSD's picture

"Note from Nick: I am 51; Jessica is 21. ... Jessica has a lot of talent... "

Is Jessica hot?  Are you two diong the big nasty?  I'm getting somewhere, hold on...

This is good news for middle aged and older men (or women of the Hillary persuasion) who have acquired some assets.  Hot, young, "talented," women looking for a sugar daddy/mommy.

OK, nothing new here...

Tue, 10/13/2015 - 17:53 | 6664407 RaceToTheBottom
RaceToTheBottom's picture

The assumption is that the Financial Management professional was not killed by his client before the client retires.

That is not a good assumption.

Tue, 10/13/2015 - 16:05 | 6664018 Son of Loki
Son of Loki's picture

"Change you can believe in!"

Tue, 10/13/2015 - 16:46 | 6664025 OldPhart
OldPhart's picture

First, where can one possibly invest with a guarantee of capital?  We already know that any funds not under personal control are likely to be snatched by the Bank or Government.  Also, why invest under what is essentially a negative interest environment where losing capital is virtually guaranteed (through inflation and negative interest).

Any investment I make will be in solid, tangible form and it will certainly make no one any money other than the one time premium.  Plus it will be under my complete personal control.

So fuck you with 'investment advice' and the cheerleading for the parasites of wall street.

Tue, 10/13/2015 - 16:09 | 6664031 Vylahkinnen
Vylahkinnen's picture

Or I could join some death-loving cult and...yeah. I thought so. Go fuck yourself. Need to work until I am 75 - and maybe live a year longer. According to Sinn - minimal wage will be gone in a year, but we have to work until we are 75 - with a life expectancy of 76.  This game is rigged. Bring the fucking guillotine...

Tue, 10/13/2015 - 16:10 | 6664036 HenryHall
HenryHall's picture

The solution is pretty easy in the light of present laws.

It is simply - emigrate!  And, in time, become a dual citizen.

Wed, 10/14/2015 - 05:49 | 6666107 Bobbyrib
Bobbyrib's picture

Exactly, stick the bill to those dumb enough to remain in this sinking ship. The bill will not be paid anyway.

Tue, 10/13/2015 - 16:12 | 6664043 J Pancreas
J Pancreas's picture

I feel quite comfortable with my family's money manager. As the head of my household with seven children, I'm fortunate to have found a bright young man who guarantees me 18% growth per month. He tells me that his secret to such a return is with an oil prince in UAE. I just reinvest all the earnings and have a portfolio worth over 2 million from my modest salary as an assistant manager at my local Abercrombie and Fitch. I've put all my family's money and also took out a second mortgage to increase my gains.

Tue, 10/13/2015 - 16:16 | 6664073 HenryHall
HenryHall's picture

Your family's money manager isn't named Madoff by any chance?

Tue, 10/13/2015 - 16:34 | 6664171 Osmium
Osmium's picture

18% PER MONTH?  Rule of 72 (72/Interest) = Number of periods to double principle would tell me you are

going to double your money every 4 months?

Tue, 10/13/2015 - 17:55 | 6664414 RaceToTheBottom
RaceToTheBottom's picture

It helps to have a Nigerian Prince handle all your investments....

Tue, 10/13/2015 - 16:12 | 6664044 Oldballplayer
Oldballplayer's picture

You mean someone earning money over a longer period with more risk tolerance can make more money for a manager?

I think I learned that the second day of finance class. And only because I slept through the first one.

Tue, 10/13/2015 - 16:14 | 6664048 Dr. Engali
Dr. Engali's picture

What a bunch of rubbish. Neither the millennials, nor the FRN will be around long enough to worry about it.

Tue, 10/13/2015 - 16:13 | 6664049 i_call_you_my_base
i_call_you_my_base's picture

"Jessica" isn't going to have shit, because Jessica has $150K in student loans and has to save $50K for a downpayment on a house on top of paying $2K / mo in rent. There will be no "investments", other than in housing when that happens at 40 years-old.

Tue, 10/13/2015 - 16:38 | 6664183 Ms. Erable
Ms. Erable's picture

By the time 'Jessica' has retired from blowing slobs that have real money, she'll be able to get personal loans secured by her nose ring and her tatoos.

Tue, 10/13/2015 - 16:13 | 6664051 lordbyroniv
lordbyroniv's picture

go long risk bitchez !!!11111

Tue, 10/13/2015 - 16:14 | 6664060 A_Gobshite
A_Gobshite's picture

Isn't millennial's retirement accounts an oxymoron?

1. they don't save

2. they will never get to retire

Tue, 10/13/2015 - 18:34 | 6664516 L Bean
L Bean's picture

Millenials are also among the 1%, but I imagine they will all leave America at some point with the rest of them, unless there's a truly immediate cataclysm of some sort which catches them off guard.

Wed, 10/14/2015 - 05:54 | 6666113 Bobbyrib
Bobbyrib's picture

God, I hope they stay in the US. If they follow me where I am going I will be really pissed. Those ignorant, Obamamite, poor work ethic having douchebags need to finish the job in the USofA. Hopefully the government would restrict travel after I have safely left the sinking ship.

 

SNL skit making fun of millennials: http://www.hulu.com/watch/852308

Tue, 10/13/2015 - 16:15 | 6664062 seek
seek's picture

These sorts of stories are getting silly. We've already crossed the Rubicon, for probably 95% of the population (and that's a low estimate) there will be no retirement. At best, reduced hours in their old age. They'll be lucky to afford deathcare.

Side note: a whole lot of people are on a perpetual refinance cycle on their homes, so the one thing that might have made life easier (paid off place to live) is turned into a source of perpetual debt obligation as well.

I've said it before, will say it again: the future is filled with starving, poor, old people. (And young people too, for that matter.)

Tue, 10/13/2015 - 18:15 | 6664465 centerline
centerline's picture

+1

Tue, 10/13/2015 - 18:36 | 6664525 L Bean
L Bean's picture

The old people aren't going to last very long. Everyone's unhealthy these days. Lots of geriatric cancers etc. 

 

Tue, 10/13/2015 - 20:00 | 6664845 Bananamerican
Bananamerican's picture

"the future is filled with starving, poor, old people, young people....and bankers on fire"

Tue, 10/13/2015 - 16:15 | 6664064 Arthur Schopenhauer
Arthur Schopenhauer's picture

They want you to think you'll be left behind so as to motivate you to pour the absolute maximum amount you can into a bunch of their 'managed' mutual funds.

Tue, 10/13/2015 - 16:17 | 6664075 One And Only
One And Only's picture

This is not true. 

Old people don't do anything and they are afraid to spend money. 

My grandfather shocked us when he died. He had $2 million in brokerage account and he had literally just reinvested dividends in 2 stocks since 1990. But he used to wash paper plates to conserve. Never paid to take us out to dinner and issued $15 up to age 18 as Christmas presents. 

I have come to known through my job that almost all old people are secretly wealthy. 

Tue, 10/13/2015 - 16:27 | 6664136 J Pancreas
J Pancreas's picture

DGI FTW! Time and a few quality companies that are dividend growth stalwarts can provide a lifetime of income that keeps pace with inflation. Your grandfather is a textbook example of how to "set it and forget it" regarding investing and how to come out ahead. Seriously ZH gold cr0wd, your pet rocks that you bury like squirrels can't match the above example for putting cash to work for you.

Tue, 10/13/2015 - 23:49 | 6665719 Lore
Lore's picture

Good parrot. Which house are you with?  Do they let you empty the bag from the paper shredder "FTW?"

Tue, 10/13/2015 - 17:16 | 6664303 No More Bubbles
No More Bubbles's picture

Same thing happened in my family.  Useless sack of shit people who don't even know how to enjoy their life.  Letting the crooks of Wall Street play with their money- while they living like they are poor.  FOR WHAT??????

Tue, 10/13/2015 - 18:41 | 6664534 L Bean
L Bean's picture

Same here, with causal dysfunction manifesting over several generations because of it!

Money men are America's clergy, they are more trusted than our doctors and scholars are.

As our friendly Latvian potato hauler would say; "Is become problem".

Wed, 10/14/2015 - 00:09 | 6665761 Lore
Lore's picture

Re: "almost all old people are secretly wealthy."  <-- Couple of thoughts:

1) "Wealth" is relative, especially when everybody around you is making stupid decisions and getting fleeced. "Wealth" might just mean you haven't made the same mistakes or gotten fleeced yet;

2) I find that Senior Seniors (~85+) are typically more frugal, responsible and wealthy than their Boomer children, who seem innocent about money and debt.  Several co-workers and friends whom I previously considered more or less secure financially are gradually leaking details about themselves that make it clear that they are stretched as thin as the system will currently allow.  I am in a position where my signature is requested for approval of mortgage refinance applications, and the people who come to me have been living in their homes for decades. The stuff that they tack onto the mortgage is astonishing: travel, frivolous gifts, parties...

Gen-Xers and Millennials might be unwise to presume the existence of a strong parental safety net, especially one in the hands of a shaky, corrupt banking complex.

Tue, 10/13/2015 - 16:16 | 6664077 ASACJon
ASACJon's picture

Perhaps we will invest the 'savings' enjoyed by renting clothing, cars, and habitats in loadable stock market gift cards. 

Definitely signs of a healthy economy and body politic!

Tue, 10/13/2015 - 16:19 | 6664089 Seasmoke
Seasmoke's picture

Why would anyone continue to play this rigged game ??

RESET. OR. REVOLT.

Tue, 10/13/2015 - 16:20 | 6664093 cheech_wizard
cheech_wizard's picture

Start by brushing up on bank alarm systems... You'll need to bypass those first.

Standard Disclaimer: Bonnie and Cheech, err Clyde 

Tue, 10/13/2015 - 16:21 | 6664097 RmcAZ
RmcAZ's picture

"Sixty-one percent of respondents to a 2010 Allianz survey of 3,257 people said “they were more scared of outliving their assets than they were of dying”.This figure increased to 77% for those between the ages of 44 and 49, and as high as 82% for those “in their late 40s who had dependents."

This actually makes me sad.

Tue, 10/13/2015 - 16:21 | 6664098 Larry Dallas
Larry Dallas's picture

This is what happens when you let guest bloggers pay you to pitch shit on your respectible blog.

Tue, 10/13/2015 - 16:21 | 6664100 madcows
madcows's picture

I don't expect that I will ever be able to retire.

I expect that I will have to sell everything to buy food or pay taxes or some other entity.

The collapse will wipe everything out.

Only the uber-rich that have emigrated to some bunker in a foreign land with gold will have anything left when the dust settles.

We Proles will have been inflationed to death or drafted and shot full of holes long beforehand.

Tue, 10/13/2015 - 16:21 | 6664104 stant
stant's picture

Anybody with stash of quarters be way ahead by the time this deflation plays out

Tue, 10/13/2015 - 16:30 | 6664137 Zen Master
Zen Master's picture

What to say to a millennial:

 

Here is how you save for retirement, Punk..............

 

You don't! Now stop listening to a bunch of moron meat puppets trying to sell you on "everything is awesome."

 

Here's the fact...everything you are told about money, credit and circulation is a big-fat lie!

 

You think you're going to retire someday? You better prepare to be Christ like and get everyone of your fellow man around the world to join you in at least a 40-day fast (a complete strike of the system). That means not working, shopping, consuming energy of any kind, or conducting commerce in any way for that time-frame.

 

Only by shutting down the system will the "commoners" be taken seriously and "change" you can believe in takes place.

Tue, 10/13/2015 - 16:27 | 6664138 lasvegaspersona
lasvegaspersona's picture

Jessica

buy gold, store it in a hole (in the ground) ignore the 'massive advantages' of the 401k and while your friends are enjoying the returns that allow them to have the occasional $355 hamburger (in 2060) you will have essentially the same value that you saved over the years and no one will take a penny from you for their 'advice'.

There is also a good possibility that your gold will suddenly increase in price by a factor of 24X (as it did from 1971 to 1979) or even more.

Tue, 10/13/2015 - 16:27 | 6664139 83_vf_1100_c
83_vf_1100_c's picture

$270k is not that much in the new Zimbabwe bucks we will be using.

Tue, 10/13/2015 - 19:16 | 6664651 tenpanhandle
tenpanhandle's picture

Exactly.

Tue, 10/13/2015 - 16:28 | 6664144 itchy166
itchy166's picture

The welfare state will look after everyone - easy with millenials.  They are being brainwashed into wanting a smart car, a micro-home and an iPhone.  Add on some food stamps and they are good to go

Tue, 10/13/2015 - 16:29 | 6664146 RopeADope
RopeADope's picture

This reminds me of the 'advisors' back before the dot com crash telling boomers they needed to have 2 million dollars saved or they would be eating catfood.

Millenials, if you invest in the NOW you will not need 270k every year in retirement.

These tools always tell people to give up the NOW for some imaginary LATER and will scare them half to death to do so.

Tue, 10/13/2015 - 16:31 | 6664157 PoasterToaster
PoasterToaster's picture

Hasn't this bullshit propaganda about "The Millenials" run its course yet?

They are not rich, they never will be as a group and they can't replace the cash cow Baby Boomers because the economy is in a long depression.  They will never recover, as a group, from this blow.

They are not wunderkind, or Digital Natives, or any of this other futuristic nonsense that comes out of rancid 1950's propaganda   Old farts pinning their hopes that their lives won't have to change because suddenly the Golden Children will ride to the rescue with their community minded altruism, belief in big institutions and The System need to accept that isn't going to happen.  These broke kids, if they ever do get money, are not about to fork it over to the old assholes who screwed them over.  They aren't that stupid, and they blame their woes on Baby Boomers, rightly or wrongly.

There is nothing more special about this group than any other group.  They are just like everyone else.  Enough of this goddamned social engineering from the Aristocrats.

 

Tue, 10/13/2015 - 16:32 | 6664165 arrowrod
arrowrod's picture

I'm not the financial genius that "financial brokers" are.  When I go see a broker, I listen carefully.  When they are particularly negative on an investment, I back up the truck and buy.  I cannot believe how reliable this has been.

Financial brokers are con men, selling whatever they make the most commission on.  Then after you buy, they borrow your shares, and short them.

Tue, 10/13/2015 - 16:41 | 6664191 Omen IV
Omen IV's picture

This will leave them with about $275,000 at the end of their century-long lives.

bullshit - 275k at the century mark based upon the contributions as noted ?

 

these people should shoot themselves at 60 years old more effective retirement ...plan

 

The USA is an open air insane asylum

Tue, 10/13/2015 - 16:41 | 6664193 roisaber
roisaber's picture

Nobody from my generation can afford to save any fucking money. I pay more in rent for a one bedroom apartment that has banana slugs slithering across the living room every night than my parents pay for a two story tract home right next to a golf course in San Diego. Fuck you adults who spent our future on Ronnie Raygun's sci-fi alien invasion defense system. Everyone over the age of 40 should be ground up; rendered into their component oil; and used to lubricate my car.

Tue, 10/13/2015 - 16:57 | 6664249 ToSoft4Truth
ToSoft4Truth's picture

Date fat girls.  They’ll buy you stuff in exchange for personal attention.    The Romans did it….. 

Tue, 10/13/2015 - 17:17 | 6664308 Pure Evil
Pure Evil's picture

And, just think, like all government programs, once they've been implemented for the current 40+ demographics, it'll never get rescinded.

How many more years until you're 40?

Tue, 10/13/2015 - 17:25 | 6664332 plane jain
plane jain's picture

Assuming you are a millenial, yeah, y'all are broke.

As far as "everyone over 40" if you check your math someone would have to be at least 48-49 to have been old enough to vote for Ronnie's second term in office; over 50 to have voted for his first term.

I'm over 40 and when Ronnie was voted in the first time I was 10. 

Tue, 10/13/2015 - 18:01 | 6664432 RaceToTheBottom
RaceToTheBottom's picture

Nothing will ever happen unless you get off your duff and make it happen:

If you want to use ground up people to lubricate your car, make it happen!

Tue, 10/13/2015 - 19:20 | 6664675 tenpanhandle
tenpanhandle's picture

Fuck you and your car.  Sell one of your nose rings and hold off on covering your other arm with tatoos.

Tue, 10/13/2015 - 19:43 | 6664775 Stevious
Stevious's picture

Haha...you got my upvote, and darn...I'm over 50! 

But really, why not move?  San Diego's gonna slither into the Pacific with the next one, and here in NH I've nice 1BR apartments for rent @ $690.  Of course the beaches aren't so nice...

 

Wed, 10/14/2015 - 00:23 | 6665814 Lore
Lore's picture

That's the first thing that comes to my mind when people living in some holiday destination bitch about real estate "affordability" and the cost of living:  M O V E !

Tue, 10/13/2015 - 16:56 | 6664244 yogibear
yogibear's picture

That's why Obama and his globalist are polishing the nukes.

 

Tue, 10/13/2015 - 16:59 | 6664256 TomB
TomB's picture

Funny how they assume a retiree needs $100k a year to live on when the median household income is just $53,657.

Tue, 10/13/2015 - 17:01 | 6664265 ToSoft4Truth
ToSoft4Truth's picture

Not much different than Transamerica® projecting a 10% return in their 401K literature. 

Tue, 10/13/2015 - 17:06 | 6664278 VegasBob
VegasBob's picture

The problem is that when you factor in the Fed's 2% inflation target, coumpounded annually, the price level doubles about every 35 years.  It gets worse as more time passes.  If you figure graduation from college at age 23 and retirement at age 67, that's a 44-year working career and you'll need 2.4 times the number of today's dollars just to cover inflation.  And government inflation figures are grossly understated so they don't have to pay out so much in annual cost-of-living adjustments.

Tue, 10/13/2015 - 17:11 | 6664292 Banjo
Banjo's picture

Stopped reading where the article mentions power of compounding returns.

Tue, 10/13/2015 - 17:12 | 6664293 No More Bubbles
No More Bubbles's picture

This piece is complete crap.  There won't be any account with even $270, let alone $270K.  There won't be 2% inflation, folks.  No, there is going to be crushing deflation that will utterly collapse the price of EVERYTHING - particularly fake, Ponzi assets, which is what is holding this whole shitshow eCONomy together, for now....

 

Wake up!

Tue, 10/13/2015 - 21:12 | 6665162 Bunga Bunga
Bunga Bunga's picture

After Yellen starts helicopter printing, you need to withdraw $270bln ... a day!

Tue, 10/13/2015 - 17:15 | 6664299 Spungo
Spungo's picture

Life long customers are more valuable than short term customers? I'm fucking shocked. What a stupid article.

Tue, 10/13/2015 - 17:20 | 6664316 rsnoble
rsnoble's picture

Of course this is impossible so them putting little effort into saving is the correct move.

Tue, 10/13/2015 - 17:23 | 6664322 SMC
SMC's picture

Not a single mention of productive physical assets.

Get off the hamster wheel.  Invest in yourself.

Tue, 10/13/2015 - 17:49 | 6664397 Puchica
Puchica's picture

"Given these withdrawal figures, we also took into account that millennials will likely live until 100, and baby boomers until 85."

Ha! If I live to be 100, that means that I would have survived WWIII, cancer, global warming, water wars, fought off 1,000 preppers, drank purified water, and prayed to the spaghetti monster every day.

Tue, 10/13/2015 - 19:30 | 6664718 ShakaZulu
ShakaZulu's picture

I figure this boomer will have to do the same just to make it to 85.

Tue, 10/13/2015 - 17:57 | 6664420 NevadaMirage
NevadaMirage's picture

Compounding returns LOL! Listen to these deluded baby boomers talk to millenials about investing like it's the 1980s.

Tue, 10/13/2015 - 18:03 | 6664438 DontFollowMyAdv...
DontFollowMyAdviceImaDummy's picture

BALDERDASH!!!

 

The 20-something does not have a job that would allow for saving anything that leech could "money manage" fee-hoover til death

Tue, 10/13/2015 - 18:09 | 6664454 homiegot
homiegot's picture

Inflation adjusted! Ha ha a a a a a a ahahah a ha a hahaaaaa!

Tue, 10/13/2015 - 18:35 | 6664521 hongdo
hongdo's picture

What a load of crap.  I thought ZH usually WARNED you about these fools.  Wasn't there another recent ZH article making fun of the 2 and 20 crowd?  I love where he claims you will make 7% in stocks and 3% in bonds  (neglecting to average in the future negative bond returns).  Of course he will fall back on "past returns are no guarentee of future returns".  Looks like his 1% fee is guarenteed though.   Off the top? 

The last "financial advisor" I saw recommended variable annuties to me.  At current interest rates and an annual 5% for me and 2% for her - I laughed all the way out the door. 

When my uncle died his portfolio manager at a large brokerage tried to claim that she was his implied beneficiary.  All filth.

Tue, 10/13/2015 - 18:43 | 6664545 PrettySkulls
PrettySkulls's picture

Thats a lot of assumptions to make, and a lot of them arent conservative.

7% average annual return? linear or geometric? given that "there will be no rates normalization in my lifetime" (Bernanke) this return seems.... unlikely.

3% bond returns? see above, not in Helicopter Bens lifetime...

2% inflation? yeah, right. real inflation has run at about 4.5% annually over the last century in the era of central banking.

1% fee.... remember that this fee is usually calculated like inflation, and applies to the gains as well as the equity... so more than 1%

increasing earning power over the course of their life? like no possibility of getting laid off? do they not undertsand economics at all? why make an assumtion that nothing will ever go wrong with the (assumed) earnings curve? have they not noticed that those higher paid jobs are not being created, that the "job growth" is weighted towards low pay service jobs?

ffs, they have described a plan that will happen to practically no-one, and said "wow, look at this!"

 

Now fuck off and run your numbers again with 4.5% inflation, and -1% bonds, and an annualised growth of 3%, and a 1% of equity fee.

You'll still make your nice fees, off of some poor cunt trapped by law in a "saving plan" that is bleeding them white, you fucking vultures.

 

Retards. Complete Retards.

Tue, 10/13/2015 - 18:54 | 6664584 hongdo
hongdo's picture

Sir.  You are too polite by far.

Tue, 10/13/2015 - 20:43 | 6665024 Shed Boy
Shed Boy's picture

$135,000 a year?!?!?1 To live on?!?!? What the hell?!?1 do you people think everybody is a freakin Kardashian? I'm retired, house and all bills paid for. This last year I lived on less then $20,000 and lived like a king! Of course...I passed on the new iPoop stuff and bought a couple of pair of jeans at the thrift store. But sheesh....We Americans can piss away money like nobody else on the planet.

Oh....and my garden has saved me thousands of dollars and feeds a lot of people. I can eat 3 great meals for what most people spend at Burger King to eat garbage.

Living within our means has never been something we have ever strived for.  Good luck Millenials!

Tue, 10/13/2015 - 22:11 | 6665351 Obamamerica
Obamamerica's picture

yeah but you apparently are not up to your eyeballs in debt. You're odd. Time to confiscate your wealth and put you in a re-education camp!

Tue, 10/13/2015 - 21:27 | 6665213 gregga777
gregga777's picture

The article contains wildly optimistic assumptions assuming, or at least considering the possibility, that it's true that we are on the downslope of "Peak Civilization" (aka, "post-Peak Oil" or have already reached the resource constrained "Limits of Growth"). Because in that event we are all well and truly screwed! [Reference ourfiniteworld.com.]

Tue, 10/13/2015 - 22:10 | 6665346 Obamamerica
Obamamerica's picture

They forgot to say that Jessica gets a job with the Federal Govt at age 25, works 3 hours a week, makes 150K, and gets a lifetime pension and medical. When she turns 50 the peasants rise up and burn down DC. Jessica perishes. Did Jessica make the right choice?

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