EYE ON THE MARKET
S P E C I A L
E D I T I O N
The
Millennials
The Millennials
Now streaming: the millennial
millennial journey
journeyfrom
fromsaving
savingtotoretirement
retirement
Executive summary
EXECUTIVE SUMMARY
THE M I LLE N N I A L GEN ER ATI O N ( I N D I V I D U A LS BORN
BE T WE E N 1982 AN D 20 0 0 ) I S TH E SU BJECT OF
I NTE N S E S C RU T I N Y: their likes and dislikes, social media
inclinations and digital footprints, fashion sense, dining habits,
reproductive trends, political and religious views, workplace
objectives, etc. This year, millennials will overtake the baby
boomers as the largest living generation in the United States,
so there are plenty of reasons to study them.
How will millennials manage their finances and maintain financial
independence throughout their working years and through retirement? We take a look in this proposal for a web-based show
(The Millennials) available for live streaming. Millennials that bingewatch the series in its entirety, as well as their advisors, employers
and parents, will gain a greater understanding of financial security
in a rapidly changing world, one that millennials will now inherit.
— Michael Cembalest
J.P. Morgan Asset Management
THE MILLENNIALS
EYE ON
THE MARKET
S P E C I A L
E D I T I O N
SUMMARY OF FINDINGS
• Today’s millennials are highly educated, but face
headwinds in terms of student debt, global competition for
the best jobs, below-trend wage growth and rising
pressure on the federal government to curtail the
entitlements they currently and will eventually receive
• At the same time, millennials are often inclined to hold
more cash than prior generations, are less likely to marry
or own a home, and will increasingly finance their own
retirements due to declining availability of defined benefit
pension plans. Given rising life expectancies, their
retirements may be longer than their working years
• To add to these challenges, more than three-quarters of
adults in their 50s experience job layoffs, widowhood,
divorce, new health problems or the onset of frailty among
parents or in-laws, all of which disrupt their ability to save
• The good news: the financial tools needed to deal with
these challenges are within reach, provided that
millennials use them early enough
• How can median-income millennials do it? It starts with a
plan to put 4%-9% of pre-tax income into retirement
accounts each year, starting at age 25. For affluent
millennials, the range would be 9%-14%; and for high net
worth millennials, 14%-18%
Income replacement ratios if no savings adjustments take
place to offset adverse events
Retiree spending as a percent of pre-retirement disposable income
100%
95%
90%
Original target
After impact of
negative events
85%
80%
75%
70%
65%
60%
Median-income
Affluent
High net worth
households
households
households
See Section 1 of the Production Notes in the full white paper for an
explanation of income replacement ratios and the subsequent trajectory of
retirement spending adjusted for inflation. Source: JPMAM. 2015.
• The rest of the plan is based on additional savings from
after-tax income, employer matching contributions and
consistent investment discipline
• It may be hard for millennials to “invest their way out” of
adverse events. Example: single individuals retiring three
years earlier than planned may accumulate lower savings
before retirement, draw on savings sooner, and accelerate
Social Security at a discount. To fill the gap, they would
need to earn real equity returns over their lifetimes that
are close to the highest levels seen since 1935
Recommended annual pre-tax contribution to savings by
each working spouse to offset impact of adverse events
Required annual real return on equity to offset the impact
of a single individual retiring 3 years early
Percent of pre-tax income
10%
16%
Calculated real return on equity
Historical S&P 500 real return
9%
12%
8%
8%
7%
4%
6%
5%
0%
Median-income
households
Affluent
households
High net worth
households
In addition to contributions shown, households are assumed to save 2% of
after-tax income, and benefit from a 50% employer match of pre-tax
savings, capped at 3%. Savings begin at age 25. Source: JPMAM. 2015.
2
Real return on equity, annualized
11%
20%
2
• One possible consequence of inadequate saving in advance
of adverse events: sharp declines in “income replacement
ratios”, which measure the amount of money millennials
will be able to spend in retirement
T HE M I L L E N N I A L S
Median- Affluent High net Median
Peak 75th perc.
income individual worth
real S&P real S&P real S&P
individual
individual return
return
return
Original planned retirement age for median is 67; for affluent and high net
worth, 65. Median, peak and 75th percentile returns based on 35-year
rolling periods from 1935 to 2015. Source: Robert Shiller, JPMAM. 2015.
THETHE
MILLENNIALS
EYE ON
MARKET
S P E C I A L
E D I T I O N
THE MILLENNIALS: BACKSTORY AND CHARACTER DEVELOPMENT
Backstory
“The Millennials” are a group of 8 college graduates from the
University of Colorado. Passionate, idealistic and full of
ambition, they enter the workforce at age 25 and make their
mark on the world. The series follows each of them
throughout their working lives and through their retirement
years, tracking their career successes and failures and
monitoring their financial wealth.
Character development
Here’s what viewers will learn about Evan, Meri, Jane, Chad,
Ken, Ima, Anita and Chip.
Millennials are highly educated, but indebted; some are at a
global skills disadvantage
 In 2013, 47% of 25-34 year-olds had a postsecondary
degree, and another 18% had completed some
postsecondary education – together, more educated than
any other generation of young adults in U.S. history1
 Millennials are more likely to study social science or fields
such as communications, criminal justice and library
science, and less likely than previous generations to major
in fields like business, health, and STEM subjects (science,
technology, engineering and mathematics). Despite their
love for social media, the share of millennial computer
and information science majors has actually fallen over
time, particularly among female millennials5
Millennials are less likely to own a home
Our millennials will face labor market pressures, slower real
income growth, delayed household formation, the burden of
student loan repayment and aftershocks from the financial
crisis. As a result, in aggregate they are less likely to own a
home. Over the long run, home ownership has been positive
for most households given price appreciation and the ability
for families to leverage their purchase by 80% or more.
Renters do not build equity to draw upon in the future.
Probability of homeownership: 18 to 34 year olds
19%
18%
17%
 60% of students with bachelor’s degrees in 2012-2013
graduated with an average debt balance of $27,3002. The
16%
average student loan balance as a % of median income
has risen from 20% in the late 1990s to 50% in 20143
 While American millennials are well educated, they may be
less prepared for today's job market than international
peers. U.S. millennials ranked 21st out of 22 Organisation
for Economic Co-operation and Development (OECD)
countries in numeracy; in literacy, half scored below the
minimum proficiency level; and on problem-solving, 56%
met minimum standards, ranking behind every other
OECD nation they were compared with4
1
“15 Economic Facts about Millennials”, The Council of Economic Advisers,
2
“Trends in Student Aid 2014”, College Board, 2014
3
4
Long-run trend
Actual
15%
14%
13%
12%
1980
1985
1990
1995
2000
2005
2010
Source: Bureau of Labor Statistics, Council of Economic Advisers. 2014.
October 2014
Bridgewater Daily Observations, June 19, 2015; for those aged 30-39
“America’s Skills Challenge: Millennials and the Future”, Educational
Testing Service, January 2015
5
“15 Economic Facts about Millennials”
J.P. MORGAN PRIV A TE BA N K
J.P. MORGAN ASSE T MA N A G E ME N T 3
3
THE
MILLENNIALS
EYE ON
THE
MARKET
E D I T I O N
Millennials are less likely to marry
According to Pew Research, fewer millennials will be married
by age 34 compared to prior generations, and a larger
percentage of them will remain that way. The primary
financial consequence: without a working spouse, a single
individual forgoes the compounding effect of additional
household savings, dual Social Security benefits and the
ability to pool and share expenditures.
One in four of today's young adults may never marry
Unmarried people by generation
25-34
The S&P 500 and millennial memory
10,000
1,000
Millennials join
labor force
40%
100
1975
35-44
30%
45-54
20%
1985
1995
2005
Some millennials do not have access to company-sponsored
retirement plans, and most have to finance their retirement
10%
0%
1960
1970
1980
1990
2000
2010
2020
2030
Source: Pew Research Center. 2014. Dotted lines are projections.
They are less likely to invest with retirement goals in mind
Some millennials invest in target date funds via autoenrollment plans whose equity allocations begin at 70%80%, and decline to 40% by retirement. However, others
are more skeptical about financial markets. This may be a
by-product of living through two 40%+ equity market
declines in the same decade, something that has not
happened since the Great Depression. Some millennials
prefer to save in cash: according to a Brookings Institution
study, 52% of those aged 21-36 said their savings were in
cash vs. 23% for savers of other ages6.
While this gap reflects intentions of young people to save for
homes and repay student loans, it also reflects skepticism of
the financial services industry according to Wells Fargo and
Goldman Sachs surveys. In one survey, only 20% of
millennials described the stock market as the best way to
save for the future. The challenge: above-average cash and
According to the Employee Benefit Research Institute, only
51% of workers have employers that sponsor retirement
plans. Furthermore, as shown below for private sector
workers, these plans are overwhelmingly made up of defined
contribution plans, rather than defined benefit. Around 85%
of private sector workers, and a growing number of public
sector workers (see Munnell et al in sources), will have to
finance their own retirements via tax-advantaged retirement
and traditional money management accounts.
Private-sector workers participating in an employersponsored retirement plan, by plan type
35%
30%
Defined contribution
plan only
25%
20%
Both types
15%
10%
Defined benefit
plan only
5%
0%
1979
1983
1987
1991
1995
1999 2003 2007
Source: Employee Benefit Research Institute. 2012.
6
“Think you know the Next Gen investor? Think again”, UBS Investor
Watch, 2014
4
4
2015
Source: Robert Shiller. March 2015.
Percent participating
Percent never married
50%
fixed income allocations, particularly at a time of financial
repression by the Federal Reserve, may not be conducive to
growing savings and meeting long-term retirement goals.
S&P 500 total return, Index
(Dec. 1974 = 100), log scale
S P E C I A L
TH E M IL L E N N IAL S
2011
THETHE
MILLENNIALS
EYE ON
MARKET
S P E C I A L
E D I T I O N
Millennials will likely face more job and wage uncertainty
Labor market conditions are more challenging for millennials
than for prior generations, as shown by weak real household
income growth and hours worked. While the business cycle
plays an obvious role here, there are longer-term secular
forces at work as well.
While employment and wage prospects for those with
bachelor’s degrees are higher than for high school
that their jobs will be computerized. Professors at Oxford
looked at different job segments and assigned “probabilities
of computerization” to each. Their findings: around half of
all U.S. jobs in both services and manufacturing are at “high”
risk of computerization over the next decade or two. Even if
their estimates are too high, the point is clear: some of our
millennials will face periods of un- or under-employment
during their lifetimes, which will interrupt their long-term
savings goals.
graduates7, millennials with college degrees face the risk
Manufacturing output vs. hours worked
2.5%
225
2.0%
200
1.5%
Index, 3/31/1980 = 100
Annual percent change, 6-year average
Real median household income growth
1.0%
0.5%
0.0%
-0.5%
-1.0%
175
150
125
100
Hours worked
75
-1.5%
-2.0%
1975
Real output
1980
1985
1990
1995
2000
2005
50
1975
2010
Source: U.S. Census Bureau. 2013.
1980
1985
1990
1995
2000
2005
2010
2015
Source: Bureau of Labor Statistics, Federal Reserve Board. Q1 2015.
Probability of computerization by occupation
U.S. employment, millions
5.0
4.0
Low
Medium
High
32% Employment
17% Employment
51% Employment
Transportation and Material Moving
Production
Installation, Maintenance, and Repair
Construction and Extraction
Farming, Fishing, and Forestry
Office and Administrative Support
Sales and Related
Service
Healthcare Practitioners and Technical
Education, Legal, Community Service, Arts, and Media
Computer, Engineering, and Science
Management, Business, and Financial
3.0
2.0
1.0
0.0
0.0
0.2
0.4
Probability
0.6
0.8
1.0
Source: "The Future of Employment: How Susceptible Are Jobs to Computerisation?", Frey and Osborne, September 2013.
7
According to a Bureau of Labor Statistics Economic News Release,
college graduates are unemployed at half the rate of high school
graduates (2.7% vs. 5.4%). Additionally, the college wage premium
remains near an all-time high, at about 75% for those with bachelor’s
degrees over those with a high school diploma, according to a November
2014 study by the New York Fed.
J.P. MORGAN PRIV A TE BA N K
J.P. MORGAN ASSE T MA N A G E ME N T 5
5
EYE ON
MARKET
THETHE
MILLENNIALS
S P E C I A L
E D I T I O N
Millennials are expected to live longer and longer and longer…
Millennials will likely face rising pressure on entitlements
Millennials are living longer, and many will have to finance
retirements that are longer than the number of years they
work. In 2014, the Society of Actuaries finally reflected this
emerging reality in their estimates, increasing their life span
projections by 2 – 2.5 years. Longer retirements need more
savings, particularly when saving for lifespans longer than the
simple medians shown in the next chart.
Millennials may experience a curtailment of entitlements such
as Medicare and Social Security. While the U.S. federal debt is
expected to stabilize through 2025, it is projected to rise
thereafter. Even more to the point, the 2nd chart shows that
since the creation of the entitlement system in the late 1960s,
it has been rising inexorably at the expense of non-defense
discretionary spending items, categories which are critical
drivers of long-term growth and productivity. As per
Congressional Budget Office projections, consequences of the
Budget Control Act passed in 2011 will drive the entitlement-todiscretionary ratio from 1:1 in the early 1970s to 4:1 by 2020.
Our millennials will probably be the generation that sees this
divergence come to an end, at their expense.
88
86
Born in 1940
Born in 1960
Born in 1980
Born in 2000
Born in 1950
Born in 1970
Born in 1990
84
Federal debt held by the public
120%
Actual
82
100%
80
Men
Women
Source: U.S. Census Bureau. 2015.
Probability at least one millennial spouse lives to various ages
Percent of GDP
Life expectancy at age 65 by birth year
Increasing median life expectancy for retirees
100%
Extended baseline
projection
80%
60%
40%
20%
80%
0%
1970
1980
1990
2000
2010
2020
2030
60%
Source: Congressional Budget Office. July 2014.
40%
Entitlement and non-defense discretionary spending
12%
20%
75
80
85
90
Live to age
95
100
Source: Social Security Administration, JPMAM. 2014. Probability that one
spouse will live to the listed age or beyond assuming both live to age 65.
Percent of GDP
10%
0%
Entitlement spending
8%
CBO
projection
6%
4%
Non-defense
discretionary
2%
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Source: Congressional Budget Office. March 2015.
6
6
T HE M I L L E N N I A L S
EYE ON
MARKET
THETHE
MILLENNIALS
S P E C I A L
E D I T I O N
SEASON SUMMARIES
What follows are season summaries of Seasons 1, 2 and 3. In
each episode of The Millennials, their choices and the world
around them change. We summarize each episode by
describing the savings they would need to make throughout
their lives, starting at age 25, in order to help sustain their
financial assets through the end of retirement. The following
plot devices appear in each season. For a detailed
explanation of how they work, please refer to Key to Plot
Devices Used in “The Millennials” and Additional Production
Notes in the full white paper.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
All characters appearing in this work are
fictitious. Any resemblance to real persons,
living or dead, is purely coincidental.
No animals were harmed in the
filming of this show.
Pre-tax contributions to savings
Additional savings from after-tax income
Employer match of pre-tax savings
Asset allocation between stocks and bonds
Financial market returns
Retirement spending goal as a percentage of preretirement disposable income
Changes in retirement spending as a function of age
Income level and income growth rate
Periods of unemployment
Unplanned family emergencies
Long-term care expenses
Home downpayment ratios
Student debt levels
College tuitions for children
Inflation and interest rates
Ordinary income and capital gains tax rates
Government policy on entitlements and qualified
retirement plans
J. P. MO RGAN ASSE T MANAGE ME NT
270 Park Avenue I New York, NY 10017
J.P. MORGAN PRIV A TE BA N K
J.P. MORGAN ASSE T MA N A G E ME N T 7
7
THETHE
MILLENNIALS
EYE ON
MARKET
S P E C I A L
E D I T I O N
T H E M I L L E N N I A L S , S E A S O N 1 S U M M A R Y: M E D I A N - I N C O M E H O U S E H O L D S
 The goal for median-income families in Season 1: spend the
same amount in retirement as they did in their final
working years, and have their financial assets last through
to the end of their lives with a small cushion to spare.
accumulation of their financial assets (lower market
returns, policy changes affecting Social Security, the lack of
an employer 401(k) match). In some episodes, their own
lifestyle decisions have an impact as well (conservative
investing, career detours). And in one episode, a perfect
storm hits in which a series of unfortunate events all occur
at the same time.
 Social Security plays a very important role in Season 1, and
finances the majority of retirement spending. When
everything goes according to plan (our millennials maintain
their health throughout their working lives, work to age 67
and live to old age with above-average health outcomes),
the 3% auto-enrollment rate common at many companies8
can be sufficient as a supplement to Social Security.
 In Season 1, median-income millennials realize that a
financial plan designed to weather a variety of storms
starts with annual allocations of 4%-9% of pre-tax income
into retirement accounts (assuming they also benefit from
an employer match), on top of 2% saved each year out of
after-tax income. Such a plan wouldn’t address all
potential outcomes, but would maintain financial
independence in a lot of them, and prevent them from
becoming wards of the state, or of their children.
 However, in the rest of Season 1, the millennials experience
a variety of real-life events that are out of their control.
Some impede their ability to save (unemployment, family
emergencies, early death of a spouse, forced early
retirement, repayment of student debt), while others slow
The Millennials: Summary of Season 1
Source: JPMAM. 2015.
Annual pre-tax contribution to savings required by each median earner for financial wealth to last through end of retirement
All savings begin at age 25 and continue to retirement. In addition to retirement account contributions shown in the bars, households are assumed to save 2%
of after-tax income, and benefit from a 50% employer match of pre-tax savings, capped at 3%. For couples, pre-tax contribution rates apply to both spouses.
Conservative investing and policy changes
Lower returns and life events
Life events (unemployment and emergencies)
Everything goes according to plan
The perfect storm (everything hits at once)
Early retirement and policy changes
Single
Early retirement at 62
Ep. 6
Conservative investing and policy changes
1%
Policy changes, lower returns and life events
2%
Conservative investors and financial repression
3%
Late bloomers
5%
4%
No employer match
Everything goes according to plan
7%
6%
Couple; dual-income lifestyle
Life events (unemployment and emergencies)
Lower returns, early retirement, spouse death
Pre-tax contribution as a % of income
8%
Social Security policy changes
Early spouse death, involuntary early retirement
Ep. 5
11%
10%
Lower financial market returns
Everything goes according to plan
Ep. 2
12%
9%
Couple; single-income lifestyle
Ep. 1
13%
Lower returns and life events
14%
0%
Ep. 7 Ep. 10 Ep. 8 Ep. 13 Ep. 12 Ep. 15 Ep. 9 Ep. 18 Ep. 16 Ep. 11 Ep. 17 Ep. 14
Corresponding household lifetime total savings rate (active + passive):
4%
12% 13%
11% 12% 14% 12% 11% 14%
8
8
According to Vanguard, half of all plans they oversee have a 3% autoenrollment rate. Twelve percent of plans are at a 2% rate, and another
twelve percent are at a 4% rate. Around twenty percent have autoenrollment rates of 5%-6% or more.
8
T HE M I L L E N N I A L S
13%
13%
15%
16%
24%
26%
28%
Ep. 20 Ep. 21 Ep. 24 Ep. 23
13%
14%
15%
17%
EYE ON
MARKET
THETHE
MILLENNIALS
S P E C I A L
E D I T I O N
 What happens if they don’t save enough by retirement?
When median-income millennials didn’t save enough by
the time they retired, and when adverse events took
place, the millennials had to slash their retirement
spending by 25%-40% in real terms compared with preretirement levels. In practical terms, such spending levels
brought them close to subsistence living.
 Can working longer offset inadequate saving? Other
options for the millennials: work for 3 to 4 more years,
until age 70 or 71, in order to accumulate more savings,
defer drawdown of retirement assets and boost Social
Security payments. However, not all of them will be
physically able to do it, and/or be able to find the
necessary employment opportunities.
 Could the millennials invest their way out of savings rates
that are too low? In one episode, Ken retires early and
tries to invest his way out to offset the reduction in
accumulated savings and the earlier withdrawals. The
challenge: he would have to generate 10.5% real annual
rates of return on equity every year throughout his entire
working and retirement life, which is way above any
recorded long-term post-war equity market index return.
 What if the millennials start their savings journeys later?
The table shows the required pre-tax contributions to
savings by episode assuming savings begin at age 25,
along with the same figure for those who don’t start
saving until age 35.
Median-income households
Required pre-tax contribution by
each spouse if saving s beg in at:
Episode
Ep. 1
Ep. 2
Ep. 5
Ag e 25
1.0%
3.5%
4.2%
Ag e 35
1.7%
5.9%
7.0%
Ep. 6
Ep. 7
Ep. 10
Ep. 8
Ep. 13
Ep. 12
Ep. 15
Ep. 9
Ep. 18
Ep. 16
Ep. 11
Ep. 17
Ep. 14
3.0%
3.6%
3.7%
4.0%
4.3%
4.5%
4.6%
4.7%
5.5%
5.8%
8.8%
9.6%
15.4%
4.5%
5.1%
5.4%
5.6%
6.2%
5.5%
6.4%
6.2%
8.0%
8.1%
13.3%
14.5%
19.1%
Ep. 20
Ep. 21
Ep. 24
Ep. 23
3.3%
5.1%
5.8%
6.2%
4.8%
7.2%
8.3%
8.8%
The season summary bar chart on the prior page
shows required pre-tax contributions to savings
assuming that savings begin at age 25. The
table above shows required pre-tax contributions
to savings assuming that savings begin at age
25, and also at age 35. Source: JPMAM. 2015.
J.P. MORGAN PRIV A TE BA N K
J.P. MORGAN ASSE T MA N A G E ME N T 9
9
EYE ON
MARKET
THETHE
MILLENNIALS
S P E C I A L
E D I T I O N
T H E M I L L E N N I A L S , S E A S O N 2 S U M M A R Y: A F F L U E N T H O U S E H O L D S
 The goal for affluent9 millennials in Season 2: retire in their
mid 60s, spend 15% less in retirement compared to what
they spent in their final working years, have their financial
assets last to the end of their lives with a modest cushion to
spare, and not have to sell the family home under duress.
 In Episodes 1 and 15 of Season 2 (the best of circumstances,
when everything goes according to plan), a 7.5%-8.0%
contribution to retirement accounts out of pre-tax income
every year is sufficient for our millennials, alongside their
Social Security payments (Social Security plays a smaller
role in Season 2 than in Season 1, since it only finances
about half of their retirement spending).
 However, in the rest of Season 2, the affluent millennials
experience a variety of real-life events that are mostly out
of their control. Some impede their ability to save
(repayment of student debt, unemployment, family
emergencies, forced early retirement, long-term care
expenses, college tuitions), while others slow accumulation
of their financial assets (lower market returns, policy
changes affecting Social Security, no access to a 401(k)
plan). In some episodes, their own lifestyle decisions have
an impact as well (conservative investing). And in one very
dramatic episode, a perfect storm hits in which a series of
unfortunate events all occur at the same time.
 In Season 2, the affluent millennials realize that a plan
designed to weather a variety of storms starts with annual
allocations of 9%-14% of pre-tax income into diversified
retirement accounts (assuming they benefit from an
employer match, capped at 3%), on top of 2% saved each
year out of after-tax income. Such a financial plan wouldn’t
address all outcomes, but would maintain their financial
independence in a lot of them, and prevents them from
becoming wards of their children, or having to make deep,
unexpected reductions in retirement spending.
The Millennials: Summary of Season 2
Source: JPMAM. 2015.
Annual pre-tax contribution to savings required by each affluent earner for financial wealth to last through end of retirement
Conservative investing and family emergencies
Long-term care, policy changes, lower returns
Policy changes and early retirement (age 60)
Policy changes and lower market returns
Redundancy of a spouse, lower market returns
No access to 401(k)
Long-term care event
Cost of long-term care insurance
Private college tuitions
Everything goes according to plan
1%
The perfect storm (everything hits at once)
2%
Policy changes and early retirement
3%
Ultra conservative investor
5%
4%
Retire at 62
7%
6%
Policy changes and lower market returns
8%
Parent elder-care costs and policy changes
9%
Family emergencies and lower market returns
11%
10%
Couple; dual-income lifestyle
Lower market returns
12%
Everything goes according to plan
Pre-tax contribution as a % of income
13%
Social Security, tax and 401(k) policy changes
Single
Parent elder-care costs
15%
14%
Age 58 income shift to median due to redundancy
All savings begin at age 25 and continue to retirement. In addition to retirement account contributions shown in the bars, households are assumed to save 2%
of after-tax income, and benefit from a 50% employer match of pre-tax savings, capped at 3%. For couples, pre-tax contribution rates apply to both spouses.
0%
9
10
10
Ep. 1 Ep. 6 Ep. 7 Ep. 4 Ep. 5 Ep. 12 Ep. 9 Ep. 14 Ep. 2 Ep. 8 Ep. 13 Ep. 10
Ep. 15 Ep. 17 Ep. 19 Ep. 18 Ep. 16 Ep. 22 Ep. 20 Ep. 21 Ep. 24 Ep. 23
Corresponding household lifetime total savings rate (active + passive):
21% 23% 25% 21% 23% 23% 23% 25% 27% 24%
23%
In The Millennials, affluent families are those with household incomes in
the top 5 percent, according to 2015 U.S. Census Bureau data
THE MILLENNIALS
28%
28%
23%
25%
27%
18%
26%
26%
28%
29%
25%
EYE ON
MARKET
THE THE
MILLENNIALS
S P E C I A L
E D I T I O N
 What happens if they don’t save enough by retirement?
When affluent millennials didn’t save enough by the time
they retired, and when adverse events took place, they
had to slash their retirement spending by 35%-45% in
real terms compared to pre-retirement levels. In practical
terms, such spending levels brought them close to
median-income living.
 Can working longer offset inadequate saving? Other
options for the millennials: work for 3 to 4 more years,
until age 70 or 71, in order to accumulate more savings
and defer drawdown of retirement assets. However, not
all of them will be physically able to do it, and/or find the
necessary employment opportunities.
 Could affluent millennials invest their way out of savings
rates that are too low? In one episode, Ima tries to do just
that. The challenge: she would have to generate a real
9% annual compound rate of return on her equity
portfolio every year throughout her entire life, which is
above any recorded long-term post-war equity market
index return.
 What about inheritances10? For affluent millennials, they
can be very powerful as a counterweight to adverse
events. In one episode, the millennials experience
adverse policy changes, lower market returns and life
events. However, the receipt of $400,000 at age 35
provides enough investible wealth so that their
retirements are the same as in Episode 1, when everything
goes according to plan, without an increase in their
savings rate.
 What if the millennials start their savings journeys later?
The table shows the required pre-tax contributions to
savings by episode assuming savings begin at age 25,
along with the same figure for those who don’t start
saving until age 35.
Affluent households
Required pre-tax contribution by
each spouse if saving s beg in at:
Episode
Ep. 1
Ep. 6
Ep. 7
Ep. 4
Ep. 5
Ep. 12
Ep. 9
Ep. 14
Ep. 2
Ep. 8
Ep. 13
Ep. 10
Ag e 25
7.5%
8.9%
9.1%
9.5%
9.7%
10.6%
11.2%
11.4%
12.2%
12.3%
12.9%
14.0%
Ag e 35
8.2%
9.6%
9.9%
10.3%
10.3%
11.1%
12.0%
12.0%
13.2%
12.8%
13.9%
15.0%
Ep. 15
Ep. 17
Ep. 19
Ep. 18
Ep. 16
Ep. 22
Ep. 20
Ep. 21
Ep. 24
Ep. 23
8.3%
9.7%
9.8%
10.4%
10.7%
11.1%
11.6%
13.0%
13.8%
14.6%
9.9%
11.7%
11.8%
12.4%
13.0%
13.0%
13.2%
15.2%
15.8%
16.4%
The season summary bar chart on the prior page
shows required pre-tax contributions to savings
assuming that savings begin at age 25. The
table above shows required pre-tax contributions
to savings assuming that savings begin at age
25, and also at age 35. Source: JPMAM. 2015.
10
Boston College projects $59 trillion of generational wealth transfer over the
next decade. See: “A Golden Age of Philanthropy Still Beckons: National
Wealth Transfer and Potential for Philanthropy Technical Report”, Center
on Wealth and Philanthropy, Boston College, May 2014
J.P. MORGAN P RIV A TE BA N K
J.P. MORGAN ASSE T MAN A G E ME N T 1 1
11
EYE ON
MARKET
THETHE
MILLENNIALS
S P E C I A L
E D I T I O N
T H E M I L L E N N I A L S , S E A S O N 3 S U M M A R Y: H I G H N E T W O R T H H O U S E H O L D S
 The goal for high net worth11 millennial families in Season
3: retire in their early to mid-60s, spend 15% less in
retirement compared to what they spent in their final
working years, have their financial assets last through to
the end of their lives with a modest cushion to spare, and
not have to sell the family home.
slow accumulation of their financial assets (lower market
returns, policy changes affecting Social Security and no
access to a 401(k) plan). In some episodes, their lifestyle
decisions have an impact as well (conservative investing).
And in one episode, a perfect storm hits in which a series of
unfortunate events occur at the same time.
 In Season 3, the high net worth millennials realize that a
financial plan designed to weather a variety of storms
starts with annual allocations of 14%-18% of pre-tax
income into diversified retirement accounts (assuming they
benefit from an employer match, capped at 3%), on top of
2% saved each year out of after-tax income. Such a plan
wouldn’t necessarily address all potential outcomes, but it
would maintain their financial independence in a lot of
them (and prevent them from having to make deep,
unexpected reductions in retirement spending).
 In Episodes 1 and 13 of Season 3 (the best of circumstances,
when everything goes according to plan), a 12%
contribution to retirement accounts out of pre-tax income
every year is sufficient for our millennials. Note: Social
Security plays a much smaller role in Season 3, since it only
finances 25% of high net worth family retirement spending.
 However, in the rest of Season 3, the high net worth
millennials experience a variety of real-life events that are
mostly out of their control. Some impede their ability to
save (family emergencies, forced early retirement, longterm care events, private college tuitions), while others
The Millennials: Summary of Season 3
Source: JPMAM. 2015.
Annual pre-tax contribution to savings required by each high net worth earner for financial wealth to last through end of retirement
All savings begin at age 25 and continue to retirement. In addition to retirement account contributions shown in the bars, households are assumed to save 2%
of after-tax income, and benefit from a 50% employer match of pre-tax savings, capped at 3%. For couples, pre-tax contribution rates apply to both spouses.
Social Security, tax and 401(k) policy changes
Parent elder-care costs
Lower market returns
Family emergencies and lower market returns
Policy changes and lower market returns
Retire at 62
Policy changes and early retirement
The perfect storm (everything hits at once)
Ultra conservative investor
Everything goes according to plan
Cost of long-term care insurance
Long-term care event
Private college tuitions
Policy changes and lower market returns
Long-term care, policy changes, lower returns
12%
10%
8%
6%
4%
2%
Ep. 6
Ep. 4
Ep. 5
Ep. 10
Ep. 12
Ep. 2
Ep. 11
Ep. 8
Ep. 7
Ep. 13
Ep. 17
Ep. 16
Ep. 15
Ep. 18
Ep. 21
Conservative investing and family emergencies
Everything goes according to plan
Pre-tax contribution as a % of income
Ep. 1
16%
14%
Couple; dual-income lifestyle
No access to 401(k)
Single
18%
Policy changes and early retirement (age 60)
20%
0%
11
12
12
Corresponding household lifetime total savings rate (active + passive):
28%
28%
27%
29%
29%
29%
31%
31%
31%
30%
28%
29%
29%
27%
28%
30%
In The Millennials, high net worth families are those with household
incomes in the top 1%, according to 2015 U.S. Census Bureau data.
THE MILLENNIALS
Ep. 19 Ep. 14 Ep. 20
31%
24%
29%
EYE ON
MARKET
THE THE
MILLENNIALS
S P E C I A L
E D I T I O N
 What happens if they don’t save enough by retirement?
When the high net worth millennials didn’t save enough by
the time they retired, and when adverse events took
place, they had to slash their retirement spending by 35%45% in real terms compared to pre-retirement levels in
order to remain solvent.
 Could high net worth millennials invest their way out of
savings rates that are too low? In one episode, they try to
do just that. The challenge: they would have to generate a
real 8% annual compound rate of return on their equity
portfolio every year throughout their entire lives, which
would be close to the peak long-term post-war equity
market index return on record.
 One challenge for high net worth millennials with high
savings rates: exhaustion of tax-advantaged savings
allowances. In many episodes, their intended level of taxefficient savings is above the allowable caps on 401(k)
plans and IRA accounts, and exceeds what they are
comfortable allocating to non-qualified deferred
compensation plans, given concerns about exposure as a
general unsecured creditor. As a result, some of their
intended tax-efficient savings have to be made in taxinefficient savings accounts, increasing the amount they
have to save for each dollar of retirement spending.
 What about inheritances? They can be very powerful as a
counterweight to adverse events. In one episode, the
millennials experience adverse policy changes, lower
market returns and life events. However, the receipt of
$700,000 at age 35 provides enough investible wealth so
that their retirements are the same as in Episode 1, when
everything goes according to plan, without having to
increase their savings rate.
 What if the millennials start their savings journeys later?
The table shows the required pre-tax contributions to
savings by episode assuming savings begin at age 25,
along with the same figure for those who don’t start
saving until age 35.
High net worth households
Required pre-tax contribution by
each spouse if saving s beg in at:
Episode
Ep. 1
Ep. 6
Ep. 4
Ep. 5
Ep. 10
Ep. 12
Ep. 2
Ep. 11
Ep. 8
Ep. 7
Ag e 25
12.3%
12.9%
14.3%
15.0%
15.9%
15.9%
16.2%
17.0%
18.9%
19.2%
Ag e 35
13.8%
14.6%
16.8%
16.9%
18.1%
17.9%
18.7%
19.5%
21.3%
21.8%
Ep. 13
Ep. 17
Ep. 16
Ep. 15
Ep. 18
Ep. 21
Ep. 19
Ep. 14
Ep. 20
11.9%
12.5%
12.9%
13.4%
15.1%
16.4%
16.9%
17.1%
19.5%
13.8%
14.6%
15.2%
16.0%
17.4%
19.1%
19.8%
19.4%
22.6%
The season summary bar chart on the prior page
shows required pre-tax contributions to savings
assuming that savings begin at age 25. The
table above shows required pre-tax contributions
to savings assuming that savings begin at age
25, and also at age 35. Source: JPMAM. 2015.
J.P. MORGAN P RIV A TE BA N K
J.P. MORGAN ASSE T MAN A G E ME N T 1 3
13
THE THE
MILLENNIALS
EYE ON
MARKET
S P E C I A L
E D I T I O N
THE MILLENNIALS BIOGRAPHIES
NEXT
NEXTSTEPS
STEPS
Here’s a brief description of the eight millennials that appear
in the show:
For
our research
or to request
a copy ofyour
the full
For more
more information
informationon
about
our research,
please contact
white
paper,
please
contact
your
J.P.
Morgan
representative
or
visit
J.P. Morgan representative. Click here to view the full version
of
us
at
www.jpmorgan.com/millennials.
The
full
white
paper
includes:
the white paper, which includes:
• Meri and Evan Ablaste, architects and frequenters of the
Burning Man festival whose health effects linger
• Chad and Jane Selphy, music teachers and founders of the
defunct band Pork Pie Hat
• Ken Ebbis, manager in the Colorado medical marijuana
distribution system; irregular job security patterns
• Ima Narcissus, health care consultant in San Francisco;
skeptical of markets and financial advisors
• Anita Loya (former district attorney now in private
practice) and Chip Oatley (sales rep for a large
agribusiness)
14
14
T HE M I L L E N N I A L S
•• One-page
episode
with
an an
episode
narrative
and and
One-pageanalyses
analysesforforeach
each
episode
with
episode
narrative
accompanying break-even tables, charts and assumptions;
accompanying break-even tables, charts and assumptions;
• A section explaining key plot devices used in each episode; and
• A section explaining key plot devices used in each episode; and
• Production notes on the path of retirement spending, lifetime
• Production notes on the path of retirement spending, lifetime
income vectors, home prices, financial market returns and policy
income vectors, home prices, financial market returns and policy
changes used in the analysis.
changes used in the analysis.
• Full list of sources and acronyms.
EYE THE
ON MILLENNIALS
THE MARKET
S P E C I A L
E D I T I O N
JPMorgan Chase & Co. and its affiliates do not provide tax, legal or accounting
advice. This material has been prepared for informational purposes only, and is not
intended to provide, and should not be relied on for, tax, legal or accounting
advice. You should consult your own tax, legal and accounting advisors before
engaging in any transaction. Each recipient of this material, and each agent thereof,
may disclose to any person, without limitation, the US income and franchise tax
treatment and tax structure of the transactions described herein and may disclose
all materials of any kind (including opinions or other tax analyses) provided to each
recipient insofar as the materials relate to a US income or franchise tax strategy
provided to such recipient by JPMorgan Chase & Co. and its subsidiaries.
The material contained herein is intended as a general market commentary.
Opinions expressed herein are those of Michael Cembalest and may differ from
those of other J.P. Morgan employees and affiliates. This information in no way
constitutes J.P. Morgan research and should not be treated as such. Further, the
views expressed herein may differ from that contained in J.P. Morgan research
reports. The prices/quotes/statistics referenced herein have been obtained from
sources deemed to be reliable, but we do not guarantee their accuracy or
completeness; any yield referenced is indicative and subject to change. The views
and strategies described herein may not be suitable for all investors. Certain
opinions, estimates, investment strategies and views expressed in this document
constitute our judgment based on current market conditions and are subject to
change without notice. The information contained herein should not be relied upon
in isolation for the purpose of making an investment decision. This material is not
intended as an offer or solicitation for the purchase or sale of any financial
instrument. References to the performance or characteristics of our portfolios
generally refer to the discretionary Balanced Model Portfolios constructed by J.P.
Morgan. It is a proxy for client performance and may not represent actual
transactions or investments in client accounts. To the extent referenced herein, real
estate, hedge funds, and other private investments may present significant risks,
may be sold or redeemed at more or less than the original amount invested; there
are no assurances that the stated investment objectives of any investment product
will be met. JPMorgan Chase & Co. and its subsidiaries do not render accounting,
legal or tax advice and is not a licensed insurance provider. You should consult with
your independent advisors concerning such matters.
In the United Kingdom, this material is approved by J.P. Morgan International Bank
Limited (JPMIB) with the registered office located at 25 Bank Street, Canary Wharf,
London E14 5JP, registered in England No. 03838766 and is authorised by the
Prudential Regulation Authority and regulated by the Financial Conduct Authority
and Prudential Regulation Authority. In addition, this material may be distributed
by: JPMorgan Chase Bank, N.A. Paris branch, which is regulated by the French
banking authorities Autorité de Contrôle Prudentiel and Autorité des Marchés
Financiers; J.P. Morgan (Suisse) SA, regulated by the Swiss Financial Market
Supervisory Authority; JPMCB Dubai branch, regulated by the Dubai Financial
Services Authority; JPMCB Bahrain branch, licensed as a conventional wholesale
bank by the Central Bank of Bahrain (for professional clients only). In Hong Kong,
this material is distributed by JPMorgan Chase Bank, N.A. (JPMCB) Hong Kong
branch except to recipients having an account at JPMCB Singapore branch and
where this material relates to a Collective Investment Scheme (other than private
funds such as private equity and hedge funds) in which case it is distributed by J.P.
Morgan Securities (Asia Pacific) Limited (JPMSAPL). Both JPMCB Hong Kong branch
and JPMSAPL are regulated by the Hong Kong Monetary Authority and the
Securities and Futures Commission of Hong Kong. In Singapore, this material is
distributed by JPMCB Singapore branch except to recipients having an account at
JPMCB Singapore branch and where this material relates to a Collective Investment
Scheme (other than private funds such as a private equity and hedge funds) in
which case it is distributed by J.P. Morgan (S.E.A.) Limited (JPMSEAL). Both JPMCB
Singapore branch and JPMSEAL are regulated by the Monetary Authority of
Singapore. Dealing and advisory services and discretionary investment
management services are provided by JPMCB Hong Kong/ Singapore branch (as
notified). Banking and custody services are provided to you by JPMIB. The contents
of this document have not been reviewed by any regulatory authority in Hong Kong,
Singapore or any other jurisdictions. With respect to countries in Latin America, the
distribution of this material may be restricted in certain jurisdictions. Receipt of this
material does not constitute an offer or solicitation to any person in any jurisdiction
in which such offer or solicitation is not authorized or to any person to whom it
would be unlawful to make such offer or solicitation.
Conflicts of interest may arise whenever JPMorgan Chase Bank, N.A. or any of its
affiliates (together, "J.P. Morgan") has an actual or perceived economic or other
incentive in its management of our clients’ portfolios to act in a way that benefits
J.P. Morgan. Conflicts may result, for example (to the extent the following activities
are permitted in your account): (1) when J.P. Morgan invests in an investment
product, such as a mutual fund, structured product, separately managed account or
hedge fund issued or managed by JPMorgan Chase Bank, N.A. or an affiliate, such as
J.P. Morgan Investment Management Inc.; (2) when a J.P. Morgan entity obtains
services, including trade execution and trade clearing, from an affiliate such as J.P.
Morgan Securities LLC or J.P. Morgan Clearing Corp; (3) when J.P. Morgan receives
payment as a result of purchasing an investment product for a client’s account; or
(4) when J.P. Morgan receives payment for providing services (including
shareholder servicing, recordkeeping or custody) with respect to investment
products purchased for a client’s portfolio. Other conflicts may result because of
relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its
own account.
Prospective investment strategies are carefully selected from both J.P. Morgan and
third party asset managers across the industry and are subject to a rigorous and
ongoing review process that is consistently applied by our manager research teams.
Recommended strategies are then subject to investment committee review and
approval.
From the approved pool of strategies, our portfolio construction teams select those
strategies we believe best fit our asset allocation goals and forward looking views in
order to meet the portfolio’s investment objective. As a general matter, J.P. Morgan
provides restricted advice as we prefer J.P. Morgan managed strategies unless we
think third party managers offer substantially differentiated portfolio construction
benefits. Consequently, we expect the proportion of J.P. Morgan managed
strategies will be high (in fact, up to 100 percent) in strategies such as, for
example, cash and high-quality fixed income, subject to applicable law and any
account-specific considerations.
We prefer internally managed strategies because they generally align well with our
forward looking views and our familiarity with the investment processes, as well as
the risk and compliance philosophy that comes from being part of the same firm. It
is important to note that J.P. Morgan receives more overall fees when internally
managed strategies are included.
Bank products and services offered by JP Morgan Chase Bank, N.A, and its affiliates.
Securities are offered through J.P. Morgan Securities LLC, member NYSE, FINRA and
SIPC, and its affiliates globally as local legislation permits.
If you no longer wish to receive these communications, please contact your J.P.
Morgan representative.
Past performance is not a guarantee of future results.
Investment products: Not FDIC insured · No bank guarantee · May lose value
© 2015 JPMorgan Chase & Co. All rights reserved.
0915-0803
15
J.P. MORGAN ASSE T MAN A G E ME N T
15