The average Millennial is in their 30s, an age when most of us are familiar with the ups and downs of financial life.
So while it may be surprising that the average Millennial expects to retire before age 60, not many can afford to achieve this goal.
In a February poll, YouGov asked millennials when expected to retire. The largest proportion, 30%, chose the age group 51 to 60 years. Another recent study by Principal Financial found that the average Millennial expects to retire. At 59 years old.
Other retirement studies have found that Millennials plan to work into their 60s. But taken together, the report suggests a clear pattern.
Millennials expect to retire younger. Older Americans, Generation X and Baby Boomers, expect to retire at an older age. Few workers of any age have the funds needed to retire early.
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“There’s a big difference between wanting to retire at 55 and actually retiring at 55,” said Sam Nofsinger, general manager of securities at Public, a New York-based investment platform.
The contradiction at the heart of Millennial American work life
Retirement research reveals a contradiction at the heart of the working lives of Millennial Americans. It’s that they want to retire early. They expect their retirement benefits to cost more than $1 million. But they only saved a fraction of that amount.
A recent report from Northwestern Mutual found that Millennials believe they need $1.65 million to: retire comfortably. But so far, the average amount Millennials have saved for retirement is only $62,600. This leaves him with a retirement “gap” of more than $1.5 million.
Providing a comfortable retirement in America means using a combination of Social Security, savings, and other sources to replace lost wages during the final years of life.
The sooner you retire, the more money you’ll need. Social Security doesn’t kick in until he’s 62, and Medicare usually doesn’t cover medical costs until he’s 65.
“The vast majority of people will not be ready to retire before age 60,” he said. Henry YoshidaCEO of Rocket Dollar, a retirement platform based in Austin, Texas.
Millennials, born between 1981 and 1996, are the largest generation in the U.S. workforce. almost two-fifths of the labor force in 2020, according to a report from Johns Hopkins University.
Millennials face a retirement dilemma
2023 Transamerica Worker Retirement Survey Published by Nonprofit Organization Transamerica Retirement Research Centerhighlighting this generation’s dilemma.
The largest percentage of Millennials, 32%, expect to retire. Before age 65The research revealed that. However, only one-third of millennials have a written retirement plan. Most Millennials have retirement savings, but the typical Millennial only has $49,000 saved.
There is one advantage. Millennials appear to be planning for retirement earlier than older generations. According to a Transamerica survey, the median millennial started saving for retirement when he was 25 years old. In contrast, the typical Gen Xer waited until age 30 to start saving for retirement. Baby boomers put it off until age 35.
“From what I’ve seen, they actually had better habits,” Yoshida said. “They’ve proven to be much more interested and knowledgeable about retirement preparation than Gen X or baby boomers.” “I don’t think they get enough credit for it.” not.”
Millennials have endured their fair share of financial setbacks.
Millennials “can’t take breaks”
Many Millennials went to school when the dot-com bubble burst in 2000, entered the workforce during the Great Recession of the late 2000s, and entered their prime working years when the economy nearly shut down due to the coronavirus. was.
“It’s impossible to take a break as a millennial,” said Nofsinger, a member of that generation. “We had 9/11, then we had the collapse, then we had coronavirus. Every 10 years we had a once-in-a-century flood.”
Financial experts say these crises have shaped the Millennial generation, making them more present-minded and materialistic than previous generations.
“I think millennials in general value carpe diem,” he said. Jamie Eckels, is a Certified Financial Planner at Plante Moran Financial Advisors in Auburn Hills, Michigan. “They don’t want to sit at a desk and work until they’re 65. They want to travel and gain life experience.”
Michelle Winterfield is a millennial from Detroit. Tandeman app that helps couples manage their finances.
Winterfield knows that millennials are having a hard time saving for retirement, and she doesn’t think it’s all their fault.
“I think the cost of living is crazy, especially for people who live in urban areas,” she says.
With rising home prices and mortgage rates, many millennials lack the funds to buy their first home, a rite of passage for older generations.
“You’re starting all the way back.”
“You start all the way back,” Winterfield said.
A 2022 study by the nonprofit Urban Institute concluded that early millennials, those born in the 1980s, are more likely to be underfunded in retirement than older Americans.
The study predicts that 38% of older Millennials will face challenges such as: insufficient income At age 70, that compares with 35% of early Gen Xers, 30% of late Boomers, and 28% of early Boomers. The report cites the widening wage gap between rich and poor Americans, among other factors.
And what exactly does it take for Millennials to retire gracefully at age 55?
Everyone’s situation is different. But financial planners often say workers need to spend at least 25 years building up their retirement savings, setting aside at least 10% of their income.
“If you can maintain a savings rate of 12 to 15 percent of your gross income for 25 years or more, you can retire at the end of that period, but be aware that your personal expenses are low,” he said. This is Yoshida from Rocket Dollar. “No mortgage. No consumer debt.”
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Millennials born in 1995 have a good chance of retiring comfortably by age 60 if they start saving aggressively now, CEO Gene Smart said. penelopea New York-based 401(k) platform for small businesses.
But for millennials in their 40s who don’t have much saved up for retirement, especially those with credit card or student loan debt, the lawsuit could be hopeless.
“Even within the same generation, it’s kind of a tale of two cities,” Smart said.