Millennials And Gen Z Want To Retire Before 60, Expert Explains Major Roadblocks
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In order to receive full Social Security benefits for retirement, Americans can’t retire until age 67 (if you were born after 1960). A new report found that millennials and members of Gen Z want to retire before the age of 60. However, one expert explains the major roadblocks facing younger generations who desire early retirement.
Northwestern Mutual recently released new data regarding Americans’ sentiments on the age of retirement during the pandemic. The survey found that 35% of Americans have altered their target retirement age – 24% plan to retire later than previously expected because of the pandemic and 11% plan to retire earlier. Nearly half (48%) plan on moving up their retirement timeline by three to five years.
The top reasons for planning on retiring early were: Wanting to spend more time with their loved ones (42%), focusing on hobbies/priorities outside of work (33%), and realizing their personal mission is more important than saving more (29%).
To achieve early retirement, people said they were taking actions now that include: increasing savings (29%), putting together a financial plan (22%), and discussing options with their family/purchasing investments/seeking advice from a financial advisor ( all at 18%).
“The economic environment created by the Covid-19 pandemic has caused a lot of people to re-examine their financial lives,” stated Christian Mitchell, executive vice president & chief customer officer at Northwestern Mutual. “For some, the prospect of an early retirement appears more achievable, while others are adjusting for delays. In either case, having a holistic plan is critical to navigating the uncertainty and reaching your goals.”
“Planning is not a one-and-done exercise,” Mitchell added. “It requires ongoing upkeep and the flexibility to respond to shifting circumstances. With so many people revisiting their financial timelines this year, active planning should be a priority. That requires attention, engagement and a willingness to take action, and having the support of a trusted advisor is critical in that process.”
Millennials And Gen Z Want To Retire Early
The survey noted that the youngest generations expect to retire before the age of 60. Of the respondents who were in Gen Z (born between 1997 and 2012), they said they expected to retire at 59.4. Millennials (born between 1981 and 1996) declared that they want to retire at 59.5. Overall, the average age respondents said they expect to retire is 62.6, down from 63.4 last year.
“I think this is the most fascinating aspect of the entire study,” explained Christian Mitchell, chief customer officer at Northwestern Mutual. “It’s indicative of younger generations’ attitudes towards work, savings, and retirement being fundamentally different than previous generations.”
Millennials are the generation that is most confident that they will be financially secure in retirement. According to a recent survey from Natixis Investment Managers, 79% of baby boomers are confident they’ll be financially secure in retirement, 82% of Gen Xers, and a whopping 88% of millennials.
What Do The Experts Say About Retiring Early?
One expert warns that younger generations need to factor in future financial calamities in the market and in their own lives such as unexpected medical expenses, as well as future life events, such as getting married and having a family.
“Two major caveats are the potential tax implications, which many millennial investors either do not yet understand, or have not yet considered, with the decision to take a much more aggressive approach while they are young,” Victor Chatelain – financial associate at Arch Global Advisors – told GOBankingRates. The second caveat, of course, is the potential for the market to take a downturn following what has been a 10+ year bull run. It is important in both cases, however, to consult a tax professional and an advisor, respectively, to create a financial plan, which will take potential tax consequences or market downturns into consideration over the long haul.”
However, Mitchell points out that younger generations may retire earlier but will continue to be in the workforce.
“It’s not even the same concept that a boomer would think about,” he says. “They may still be working in retirement, but it could be a passion project. It could be a nonprofit. It could be something else related to their identity.”