The ongoing quest by Wall Street to annuitize their income streams by convincing masses of unwitting individuals to stick their hard earned “savings” into volatile investments and forget about them for an annual fee continues. The latest comes from JP Morgan.  (Explanation by Andy Kiersz via BI)

“JPMorgan shows outcomes for four hypothetical investors who invest $10,000 a year at a 6.5% annual rate of return over different periods of their lives:

• Chloe invests for her entire working life, from 25 to 65.
• Lyla starts 10 years later, investing from 35 to 65.
• Quincy puts money away for only 10 years at the start of his career, from ages 25 to 35.
• Noah saves from 25 to 65 like Chloe, but instead of being moderately aggressive with his investments he simply holds cash at a 2.25% annual return.”

There are two main problems with this entire bit of analysis.

Saving Is Problem

First, while saving $10,000 a year sounds great, the real problem is that median incomes in the U.S. for 80% of wage earners is $42,564 (via the Census Bureau, 2014 most recent data).

The problem, of course, is JP Morgan assumes that these young individuals are able to save an astounding 25% of their annual incomes. This is not a realistic assumption given that many of the Millennial age group are struggling with student loan and credit card debts, car notes, apartment rent, etc.

But it really isn’t just the Millennial age group that are struggling to save money but the entirety of the population in the bottom 80% of income earners. According to a Bankrate.com survey, 63% of American’s do not have enough savings to pay for a $500 car repair or a $1000 emergency room bill. However, as noted, it even covers a large number of higher income individuals as well.

“While savings predictably increase with income and education, even 46% of the highest-income households ($75,000+ per year) and 52% of college graduates lack enough savings to cover a $500 car repair or $1,000emergency room visit.”