The old saying “Live fast, die young and leave a good-looking corpse” may be soaking into the millennial generation. PGIM Investments has found in its 2018 Retirement Preparedness Survey that a majority of millennials (62%) planned to retire only when they had enough money, but 31% were not saving for retirement at all as they didn’t see “the point of planning for retirement because anything can happen between now and then.”
The study also found 25% of all pre-retirees were not sure how much they needed to save to retire and gave themselves a “C” for preparedness.
These findings are especially troublesome as retirement income is becoming less predictable with the reduction in pension plans and questions about the continuity of Social Security. The survey also found that the Gen Xers had more concern about retirement than the millennials. They estimated they would need $2.5 million on average to retire, while millennials projected they would need $1.1 million.
The study of 1,514 adults, conducted online by Harris Poll between Jan. 18 and Feb. 1, was commissioned by PGIM Investments, the investment manufacturing and distribution arm of PGIM, the global asset management business of Prudential Financial. It also found that millennials believe “people will no longer retire comfortably in the future,” and almost 66% believed that full-time employment will largely disappear and that freelancers will make up 75% or more of the U.S. workforce.
Further, more than half of pre-retirees expect to generate income by continuing to work either full time or part time after they “retire,” compared with only 6% of current retirees.
The study also found that more than half (51%) of current retirees say they are living their “dream retirement.” This group more than likely is mass affluent (71%), have pension income (66%), are knowledgeable about investment products (57%), are/were willing to take risks (71%), and use a financial advisor (63%). Even 37% of retirees who don’t qualify as mass affluent say they are living their dream retirement. Typically, these “living the dream” retirees started savings six years earlier, on average, beginning at 40 years old.
Today’s retiree typically based their decision to retire on age and eligibility for Social Security or pensions. However, the future generations stated that when they retire will be determined less on age and more on reaching a certain wealth level, the study found. About half of Gen Xers and 62% of millennials will retire when they have saved enough money, it found.
Paying off debt also has become a more important prerequisite for retirement for pre-retirees, the study found. Overall debt levels for households nearing or already in retirement is higher, 68% in 2016 vs. 54% in 1992, and with student loans saddling the millennial generation, that issue becomes increasingly important. In fact, when asked “When did you or will you retire?” while 62% of millennials said when they saved enough money, 33% said when they paid off debt and became eligible for social security.
Other findings from the study:
- While 86% of current retirees count Social Security benefits as a source of income, only 70% of Gen Xers and 51% of millennials expect to receive these benefits when they retire.
- Pre-retirees cited these top concerns that could negatively impact their retirement: health care (57%), changes to Social Security (46%), illness or disability (45%) and inflation (30%).
- Pre-retirees also cited doing something different in retirement, such as volunteering (39%), start a new business (11%), start a new career (7%) or go back to school (6%).
- Millennials who are saving are more likely to have a higher allocation to fixed income investments and have investments that are aligned with their social values, while GenXers were more likely to have a higher allocation to equities and are more interested in active management strategies.
— Check out Good News and Bad News on Retirement Saving on ThinkAdvisor.