In 2015, the popular finance website Nerd Wallet released a survey1 indicating the retirement age for millennials would very likely be 75. This realization was based on a study that Nerd Wallet conducted by examining the financial profile of a typical college graduate. Their findings were based on many factors, including longer life expectancies and higher student debt load. It's worth noting that the website made their calculations assuming that modern retirement benefits such as Social Security and Medicare would still be intact, although they factored them in conservatively.
When it comes to millennials and their retirement directions, is this particular generation shortchanging themselves by holding onto unrealistic expectations? Perhaps. Here are some interesting findings:
A millennial miseducationA 2015 CNBC2 article declared that many millennials have “unrealistic” expectations about how much they'll need for retirement, based on a survey conducted by the Insured Retirement Institute and Center for Generational Kinetics.3 According to this survey, 70 percent of the 1,000 millennials surveyed were under the impression that they would spend less than $36,000 a year during retirement. Unfortunately, the annual expenditure for retirees aged 68-74 was already over $46,000 as of 2013. The same study indicated that 11 percent of those surveyed expected to be “gifted” money for retirement.
Delayed adult milestones
We've previously discussed how millennials need to jumpstart their retirement planning, but may put off doing so because of priorities that differ from those of generations past. Moreover, millennials are waiting longer to start their careers (voluntarily or not), waiting longer to buy vehicles, and continue to rent instead of buy - even with rapidly rising rent costs.
An article by Money4 expands on why millennials might be so resistant to make big decisions or start saving for retirement. Here, finance writer Bobbi Rebell speculates that many millennials are still haunted by the financial difficulties that harangued their parents during The Great Recession, and that the financial advice they're probably receiving from their parents is likely to be fairly fiscally conservative because of those past woes.
One lingering side effect of The Great Recession is certainly a heightened wariness of the stock market. In fact, this 2015 Business Insider5 article references a Goldman Sachs survey which found that 40 percent of millennials surveyed weren't interested in investing in the stock market at all, and another 45 percent were skeptical and only interested in investing very conservatively.
Stock portfolios and IRAs have been a viable part of retirement planning for several decades, and yet some millennials are now eschewing stocks altogether. Some are even avoiding investing because they don't feel that they know enough about the topic, while other millennials might simply be wary of the stock market because they watched a parent or loved one's portfolio take a five or six figure plunge in 2008.
If you're a millennial, we hope that you take all of this information presented here as a wakeup call to approach retirement in a more realistic manner. Remember, it's never too late to find new retirement directions for implementing a solid financial plan.