According to a new study, millennials are approaching retirement -which they will enter around 2050- in a totally different way than previous generations, not just because their beliefs and values have evolved but also because they begin saving a decade earlier.
According to the new Charles Schwab Retirement Reimagined Study, while millennials have a decade’s head start on boomers when it comes to retirement savings by creating a decade earlier, in their mid-20s, they are likely to spend less time managing their personal finances and investments once they retire than boomers or Gen X.
According to Mark J. Pinto, president of Harbourfront Wealth Management, millennials have a significant advantage over previous generations when it comes to retirement.
“Circumstances are vastly different now than they were 30 years ago, allowing this generation to save far early and at a rate that far exceeds that of the boomer generation,” Pinto said. “As a result, millennial retirement has a strikingly different connotation.”
Another major conclusion of the survey is that, in comparison to boomers and Gen X, millennials are more inclined to use their money to achieve their dream lifestyle and pursue their passions along the road and after retirement. On the other hand, older generations have a tendency to continue generating money into their retirement years.
Pinto went on to say that whereas the goal for boomers was to have target savings figure to maintain their current lives, millennials are approaching retirement with a target or dream lifestyle that many of them will be able to live out.
“The good news for millennials is that they recognize the value of thorough financial planning and advice. As a result, they will reap the benefits of their perseverance,” he stated.
According to the report, millennials conceive of retirement as a state of mind or a target lifestyle rather than a target savings sum and date.
In the study, Jonathan Craig, managing director, head of investor services and marketing at Charles Schwab, said, “We’ve seen several younger investors make their first-ever investments in the last two years, but we’re also seeing them go beyond those initial steps to engage with our digital retirement planning tools and other resources that will help them make their retirement uniquely their own.”
In terms of altering values, three-quarters of boomers and Gen Xers are likely to experience stability in retirement through homeownership. At the same time, millennials are expected to prefer travel and own only 48% of homes in retirement.
Another generational shift is that boomer have a more traditional financial attitude, with 48% investing in stocks and only 5% in cryptocurrency. 24% of millennials and 19% of Gen X want to invest in cryptocurrency in retirement.
In the report, Rob Williams, CFP, managing director of financial planning, retirement income, and wealth management at Charles Schwab, suggests that if you want to travel constantly, make it a particular line item in your retirement plan to ensure you have the finances to do so.
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“Think about how to balance higher-risk assets like digital currencies in your retirement portfolio with more traditional investments that can give you a steady stream of income when you don’t have a paycheck if you don’t have one.” Finally, you plan for retirement so that you can enjoy it. Still, it’s critical to have a good income and distribution strategy in place so that you don’t run out of money in retirement,” he concluded.