People in every generation want to retire, but whether or not they can retire often depends on when they start planning for retirement and the actions they take early on. Millennials, now the largest generation in the workforce, are currently between the ages of 20 to 37—which is a critical time to start their retirement planning and preparation—but are they even thinking about retirement?
A new national study by the Insured Retirement Institute (IRI) and The Center for Generational Kinetics dove deep into the generational divide to uncover retirement trends and realities for each generation.
The study’s findings are surprising, provocative and critical for every generation to know, especially Millennials.
Three key findings stand out to us at The Center:
- Millennials ARE thinking about retirement.
They just might not be thinking about it in a way you might expect. The study found that 68% of Millennials are saving or investing for retirement. However, this is a different approach from that of previous generations, who commonly expected and relied upon some form of a pension to prepare for and provide income during retirement. Instead of a pension, nearly half (48%) of all Millennials in the United States have a 401(k).
Going even further, the study found that rather than saving and investing for retirement, the number-one step Millennials are taking to actively plan for retirement involves reducing their debt (77%).
- Millennials are not taking action to prepare for retirement.
The study found that Millennials consider retirement an overwhelming prospect. As a result, only 29% of the Millennials surveyed describe themselves as actively preparing for retirement. In fact, 15% of Millennials include winning the lottery as part of their retirement strategy, and 11% expect to be gifted money for retirement! It’s no wonder the study also found that 60% of Millennials think it is harder to plan for retirement than to stick with a diet and exercise plan.
- Millennials don’t know how much retirement costs.
Misinformation seems to be a huge roadblock to Millennials successfully planning for retirement. The study found that 70% of Millennials think they will spend less than $36,000 per year in retirement…which is 30% less than the current national average of spending ($46,757) for those aged 65 to 74. In addition, Millennials are not planning for today’s prices, much less how much higher the cost of living will be when they are finally ready to retire.
“This study confirms what many have believed,” said IRI President and CEO Cathy Weatherford. “Millennials are not doing enough to prepare for retirement. Given this need, it will be mutually beneficial for financial advisors to engage this market and position themselves as guides who can take Millennials through the process.”
What does this mean for Millennials and every other generation? The effect will likely be significant for you—regardless of your generation. As Millennials age, whether or not they think they’ll be able to retire will affect their flexibility and attitudes regarding how long and where they’ll work, how they will provide for their own kids and even how they can help their aging Baby Boomer parents.
Can you imagine going to work every day as a 25-year-old and thinking that you will never be able to retire? That will dramatically affect your decision-making. The good news is that the national study also found that Millennials do want help in the matter and that they are willing to seek out professional help to start planning for retirement. In fact, 62% of Millennials want a financial advisor to walk them through every step, and 87% want a financial advisor to be willing to meet with them in person.
While the study should raise concerns regarding Millennials and every other generation, Millennials have the ability to take action now to learn about, prepare for and fund their retirement. They have the power of time on their side…for now.
The bottom line of the study is that Millennials are thinking about retirement more than most people would assume, but that is not translating into tangible actions to actually prepare for retirement. Every generation would be wise to meet with the Millennials they know and share their insights on why starting now is critical to retiring when they want to—and then supporting their Baby Boomer parents!
For more fascinating findings about Millennials and retirement and for some strategies you can use to take action now, read the entire study at http://myirionline.org/docs/default-source/research/iri-cgk-study—millennial-retirement-research—digital.pdf?sfvrsn=2.