Move over Baby Boomers. These days all eyes are on Millennials, those young adults between the ages of 18 and 34 who are now America’s largest living generation.1 According to the U.S. Census Bureau, Millennials in the United States number more than 75 million — and the group continues to expand as young immigrants enter the country.1
Due to its size alone, this generation of consumers will undoubtedly have a significant impact on the U.S. economy. When it comes to investing, however, the story may be quite different. One new study found that 59% of Millennials are uncomfortable about investing due to current economic conditions.2 Another study revealed that just one in three Millennials own stock, compared with nearly half of Generation-Xers and Baby Boomers.3
On the Retirement Front
How might this discomfort with investing manifest itself when it comes to saving for retirement — a goal for which time is on Millennials’ side? According to new research into the financial outlook and behaviors of this demographic group, 59% have started saving for retirement, yet nearly two-thirds (64%) of working Millennials say they will not accumulate $1 million in their lifetime. Of this group, half have started saving for retirement — 37% of which are putting away more than 5% of their income — despite making a modest median $27,900 a year.2
As for the optimistic minority who do expect to save $1 million over time, they enjoy a median personal income that is about twice that — $53,000 — of the naysayers. Three out of four have started saving for retirement and two-thirds are deferring more than 5% of their income; 28% are saving more than 10%.2
So despite their protestations, their reluctance to embrace the investment world, and a challenging student loan debt burden — a median of $19,978 for the 34% who have student loan debt — Millennials are still charting a slow and steady course toward funding their retirement.2
For the Record…
Here are some additional factoids about Millennials and retirement revealed by the research:
- The vast majority (85%) of Millennials view saving for retirement as a key passage into becoming a “financial adult.”
- A similar percentage (82%) said that seeing people living out a comfortable retirement today encourages them to want to save for their own retirement.
- Those who have started saving for retirement said the ideal age to start saving is 23.
- Those who are not yet saving for retirement say they will start by age 32.
- Of those who are currently saving for retirement, 69% do so through an employer-sponsored plan.
- Three out of four said they do not believe that Social Security will be there for them when they retire.
- Most would like to retire at age 59.
1Pew Research Center, “Millennials overtake Baby Boomers as America’s largest generation,” April 25, 2016.
2Wells Fargo & Company, news release, “Wells Fargo Survey: Majority of Millennials Say They Won’t Ever Accumulate $1 Million,” August 3, 2016.
3The Street.com, “Only 1 in 3 Millennials Invest in the Stock Market,” July 10 2016.
Identity theft is one of the fastest growing crimes in America affecting millions of unsuspecting individuals each year. A dishonest person who has your Social Security number can use it to obtain tax and other financial and personal information about you.
Identity thieves can get your Social Security number by:
- Stealing wallets, purses, and your mail.
- Stealing personal information you provide to an unsecured website, from business or personnel records at work, and from your home.
- Rummaging through your trash, the trash of businesses, and public trash dumps for personal data.
- Posing by phone or email as someone who legitimately needs information about you, such as employers or landlords.
Tax-related identity theft occurs when a thief uses your Social Security number to file a tax return and claim a fraudulent tax refund. In 2015 alone, the IRS stopped 1.4 million confirmed identity theft tax returns, protecting $8.7 billion in taxpayer refunds.1 The IRS has become increasingly diligent in its efforts to thwart identity theft with a program of prevention, detection, and victim assistance. The “Taxes. Security. Together.” program is aimed at building awareness among taxpayers about the need to protect personal data when conducting business online and in the real world.
By remaining vigilant and following a few commonsense guidelines, you can support the IRS in keeping your personal information safe. Here are a few tips to consider:
- Protect your information. Keep your Social Security card and any other documents that show your Social Security number in a safe place.
- DO NOT routinely carry your Social Security card or other documents that display your number.
- Monitor your email. Be on the lookout for phishing scams, particularly those that appear to come from a trusted source such as a credit card company, bank, retailer, or even the IRS. Many of these emails will direct you to a phony website that will ask you to input sensitive data, such as your account numbers, passwords, and Social Security number.
- Safeguard your computer. Make sure your computer is equipped with firewalls and up-to-date anti-virus protections. Security software should always be turned on and set to update automatically. Encrypt sensitive files such as tax records you store on your computer. Use strong passwords and change them routinely.
- Be alert to suspicious phone calls. The IRS will never call you threatening a lawsuit or demanding an immediate payment for past due taxes. The normal mode of communication from the IRS is a letter sent via the U.S. postal service.
- Be careful when banking or shopping online. Be sure to use websites that protect your financial information with encryption, particularly if you are using a public wireless network via a smartphone. Sites that are encrypted start with “https.” The “s” stands for secure.
- Google yourself. See what information is available about you online. Be sure to check other search engines, such as Yahoo and Bing. This will help you identify potential theft sources and will also help you maintain your reputation.
Fear You’ve Been Scammed?
If you feel you are the victim of tax-related identity theft – e.g., you cannot file your tax return because one was already filed using your Social Security number – there are several steps you should take.
- File your taxes the old-fashioned way — on paper via the U.S. postal service.
- Print an IRS Form 14039 Identity Theft Affidavit from the IRS website and include it with your tax return.
- File a consumer complaint with the Federal Trade Commission (FTC).
- Contact one of the three national credit reporting agencies — Experian, Transunion, or Equifax and request that a fraud alert be placed on your account.
- If you have been confirmed as a tax-related identity theft victim, the IRS may issue you a special PIN that you will use when e-filing your taxes. You will receive a new PIN each year.
For more information on tax-related identity theft visit the IRS website, which has a special section devoted to the topic.
Another good resource on all types of identity theft can be found online at Comparitech.
1The Internal Revenue Service, “How Identity Theft Can Affect Your Taxes,” IRS Summertime Tax Tip 2016-16, August 8, 2016.
An important anniversary in the history of American taxation just went by “mostly unnoticed,” said Philipp Alvares de Souza Soares in The Washington Post. September 8, 2016 marked 100 years since the passage of the federal estate tax on inherited wealth, better known by its critics as the “death tax.” Then, as now, the estate tax affected only a tiny number of Americans, but that hasn’t stopped it from becoming a political football in the decades since, including in this election. Today, the federal government imposes a 40 percent tax on inherited wealth in excess of $5.45 million left by a single parent, or $10.9 million from a married couple. Hillary Clinton wants to expand the tax in a bid to shrink the country’s growing wealth gap, lowering the single-parent exemption to $3.5 million. Donald Trump, on the other hand, has called for the death tax to be abolished, but his latest tax plan would tax unrealized capital gains over $10 million at death.
Taxing inheritances is fundamentally unfair, said N. Gregory Mankiw in The New York Times. The allure of making the wealthy pay their “fair share” is understandable, but it doesn’t work that way in practice. Instead, the estate tax violates the basic idea “that similar people should face similar tax burdens.” Consider this: Two different couples amass a nest egg of $20 million. The first couple live modestly, hoping to share their success with their children and grandchildren. The second couple blow through their fortune, enjoying the finer things in life. “How should the tax burdens of the two couples compare?” If the federal government taxed consumption, the profligate pair would pay more for their lavish lifestyle. But under our current system, with an income tax coupled with an estate tax, the frugal couple are punished. “To me, this does not seem right.”
Actually, “the estate tax is a fundamentally American notion,” said Chuck Collins in USNews.com. The progressives of the early 20th century rightly saw it as a democratic check against dynastic wealth and de facto aristocracy. With the Forbes 400 list of the richest Americans today holding as much wealth together as 62 percent of U.S. households, we need the estate tax as much as ever. “The estate tax makes for a fun debate,” said Barry Ritholtz in Bloomberg.com. But ultimately, out of the 2.5 million annual deaths in the U.S., only 5,000 estates are subject to the tax. Not only that, but killing the tax might have unintended effects. The Congressional Budget Office estimates that a repeal would reduce charitable giving by 16 to 28 percent, because fewer members of the super-rich would try to shield their fortunes through philanthropy. “Unless you are an ailing billionaire who lacks appropriate professional advisers, [the estate tax] is simply not a pressing issue.”
The Week – September 30, 2016