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Millennials are approaching retirement -which they will transition into around 2050- very differently from the older generations, as not only their views and values around it have shifted, but they also start saving a decade earlier, a new study finds.
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The new Charles Schwab Retirement Reimagined Study finds that while millennials have the jump on boomers when it comes to saving for retirement by starting to save a decade earlier, in their mid-20s, they are likely to spend less time managing their personal finances and investments once in retirement, as compared to boomers or Gen X.
Mark J. Pinto, president of Harbourfront Wealth Management, told GOBankingRates that millennials are heading into retirement with a far greater advantage compared to earlier generations.
“Circumstances are incredibly different now than they were 30 years ago which has given this generation the ability to save far earlier and at a rate that supersedes those in the boomer era,” Pinto said. “Because of this, millennial retirement comes with a contrastingly different meaning.”
Another key finding of the study is that compared to boomers and Gen X, millennials will be more likely to use their savings to achieve their dream lifestyle and pursue their passions along the way and once in retirement. Meanwhile, older generations tend to continue accumulating wealth during their retirement years.
Pinto added that for boomers, the goal was to have a target savings number in order to sustain current lifestyles but for millennials, many are heading into retirement with a target or dream lifestyle that many of them will be able to live out.
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“The good news for millennials is, they appreciate the power of advice and comprehensive wealth planning. As such, they will reap the rewards of staying disciplined,” he said.
Indeed, millennials think of retirement less as a target savings number and date and more like a state of mind or target lifestyle, according to the study.
“We’ve seen a number of younger investors make their first-ever investments in the last two years, but we’re also seeing them go beyond those initial steps to engaging with our digital retirement planning tools and other resources that will help them make their retirement uniquely their own,” Jonathan Craig, managing director, head of investor services & marketing at Charles Schwab, said in the study.
In terms of shifting values, three-quarters of boomers and Gen Xers alike are expected to enjoy stability through homeownership in retirement, while 61% of millennials will prioritize travel, and only 48% are predicted to own a home in retirement.
Another generational shift is that boomers maintain a more traditional approach when it comes to finances with 48% investing in stocks and only 5% invest in crypto. In comparison, 24% of millennials along with 19% of Gen X plan to invest in crypto in retirement.
Rob Williams, CFP, managing director of financial planning, retirement income and wealth management at Charles Schwab recommends in the study that if you dream of constant travel make that a specific line item in your retirement plan to ensure you have the funds to make it happen.
“If you want to maintain exposure to higher risk assets like digital currencies in your retirement portfolio, think about how to balance that with more traditional investments that can provide you with a reliable source of income when you don’t have a paycheck. And finally, you prepare for retirement to enjoy it, but it’s important to have a solid income and distribution strategy so you don’t risk running out of money in retirement,” he added.
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