The oldest Millennials are now 40 years old. Once you hit the age of 40, retirement becomes a topic that occupies a portion of your mind, perhaps replacing thoughts about recreational rugby. Those older Millennials now have retirement on their minds.
Spectrem’s study on defined contribution participants from the Millennial generation indicate how retirement concerns those investors, with an eye toward reminding advisors that at least some of their Millennial clients are as close to the last day of work as they are to the first day.
The Spectrem DC Participant Insight Series study How High Income Millennials are Preparing for Retirement determined the level of concern and commitment Millennials who are making at least $100,000 in annual income have toward retirement planning and security.
Financial planning professionals will tell you that it is never too early nor too late to begin planning for retirement. Now that Millennials are no longer the youngest influential generation (prepare for all the Generation Z articles to come out), advisors can and should have meaningful conversations with Millennial clients regarding the subjects broached in this report.
From a linguistic standpoint as well as an operational one, there is a difference between concern and worry. As a personal concern, 41 percent of Millennials report that they are uncertain they will be able to retire when they want to. Obviously, every person has a different date set as to when they want to retire, and most Millennials probably do not know when exactly they will want to check out of the workplace, but advisors should consider that concern when working with Millennials. A conversation can determine if their clients have a plan as to when they want to retire, whether it be age-based or event-based, and can determine how their portfolio matches with their desired retirement moment.
There is something to be said for the negotiation between concern and preparation. Based on the defined contribution balance of the Millennials in the study, those with a smaller balance have a greater percentage of concern; 51 percent of those with less than $10,000 in a DC account worry about being able to retire when they want, versus the 35 percent of those with a six-figure balance.
It is noteworthy that High Income Millennials have a greater concern about the timing of their retirement than they are about their present employment status (32 percent).
The decision to retire is influenced my multiple factors, and one of them is the size of the nest egg upon which a person sits when he or she chooses to leave the workforce. The Spectrem study shows that 77 percent of Millennials “fully expect to have sufficient income to live comfortably during retirement”. Of course, most of those Millennials are at least two decades away from retirement and many factors can influence that thought about having sufficient income in 20 years.
The Spectrem DC Insight Series studies are published three times a year. They include research conducted with approximately 2,000 plan participants and provide information segmented by participant age, gender and account balance.
©2019 Spectrem Group
Keywords: defined contribution, retirement, investors, advisors, Spectrem, millennials