Millennials are redefining what retirement will look like when it is their time to join the ranks.
According to a study by Bank of America Merrill Edge, 83% of millennials plan to work into retirement, which is the exact opposite of current retirees, the majority of whom say they aren’t working in retirement or have never worked during their retirement.
“That’s a fundamental shift. They may never see the end to their working days if they don’t make some changes,” says Joe Santos, regional sales executive with Merrill Edge in Los Angeles. “We have seen over the past few years consistent insecurity and uncertainty around retirement planning. With millennials and Gen X, the struggle is competing with life priorities.”
Seventy-nine percent of Gen Xers and 64% of baby boomers also expect to work in retirement.
Half of millennials ages 18 to 24 believe they will need to take on a second job to be able to save for retirement, compared to 25% for all respondents, according to the Merrill Edge Report for fall 2016.
Despite the fact that millennials are not very optimistic about their ability to save for retirement, 70% of millennial respondents and 72% of Gen Xers described their investment approach as hands on, compared to 60% of all respondents. Millennials use online and mobile apps and express interest in saving for retirement, Santos says.
Nearly one-third of millennials say they are do-it-yourselfers when it comes to making investments, compared to 19% of all respondents.
“This growing sense of self-reliance among millennials, however, seems to be increasing the desire for further financial guidance and validation from professionals,” the report found, with 31% of millennials saying they are interested in seeking to hire a financial adviser within the next five years. Forty-two percent of them said they were most open to receiving online financial advice.
Talking about finances is still taboo, the report indicates. Only 54% of survey respondents said they would feel comfortable discussing their personal finances with their spouse or partner; 39% said they would feel comfortable discussing their finances with a financial professional.
“That uncertainty causes them to underestimate what is needed for retirement. If you think of student loans for millennials, they are struggling with student loan debt. It makes retirement seem so far out there,” Santos says.
The majority of those surveyed felt they needed less than $1 million in savings to achieve a comfortable retirement, but 19% of respondents didn’t know how much they needed to save for retirement.
“And even with these estimates, two in five (40%) of today’s non-retirees say reaching their magic number by retirement will either be ‘difficult’ or ‘virtually unattainable,’” the report found. Seventeen percent of respondents said they are relying on luck to get them by.
Because millennials are so young, they have an opportunity to do all the right things so that they can have a secure retirement, Santos says. “I love seeing that they have the interest to learn about retirement by taking a step-by-step approach.”
He added that the last thing people want to do is start saving too late.
“It is a challenge when you think about so many folks straddled with debt, especially student loan debt, and growing longevity. The sandwich generation makes these milestones seem unattainable, but with some proper planning, we can get there,” he says.
The survey of 1,045 mass affluent respondents throughout the United States was conducted by Braun Research from Sept. 24 to Oct. 5, 2016. Mass affluent individuals are those with investable assets between $50,000 and $250,000 or those ages 18 to 34 who have investable assets between $20,000 and $50,000 with an annual income of at least $50,000.
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