Predictably, Millennials are carving out an unpredictable path towards retirement.
A new Charles Schwab study forecasts Millennials’ evolving vision by highlighting key differences in how Millennials, Gen X and Boomers are approaching saving for and living in retirement.
Among its key findings, the report says that Millennials have the jump on Boomers when it comes to saving for retirement by starting to save nearly a full decade earlier in their mid-20s. They are also likely to spend less time managing their personal finances and investments once in retirement, as compared to Boomers or Gen X. According to Schwab, 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, while Boomers and Gen X will aim to continue accumulating wealth during their retirement years.
“Millennials think of retirement less as a target savings number and date and more like a state of mind or target lifestyle,” said Jonathan Craig, Managing Director, Head of Investor Services & Marketing at Charles Schwab.
Shifting values, shifting retirement
Potentially spurred by self-examination that many individuals encountered as they weathered an unprecedented pandemic, Millennials expect to place value on having more flexibility and new experiences in retirement. Conversely, Boomers value stability and consistency.
Millennials also prioritize travel (61%), with less than half (48%) predicted to own a home in retirement. Again, this is in contrast to three-quarters of Boomers and Gen Xers who expect to enjoy stability through home ownership in retirement.
A quarter of Millennials, along with about 19% of Gen X, have plans to invest in digital currencies in retirement. On the other hand, Boomers maintain a more traditional approach when it comes to finances. Focusing on financial security and traditional investments, nearly half of Boomers invest in stocks, while just 5% put money into digital currencies.
Visionary retirement
Schwab’s study went a step further and laid out four personas that they predict will capture the approach of future retiring Millennials:
- Practical Achievers – Approximately 12-22% of future Millennial retirees will be intent on stability, and these “Practical Achievers” will prioritize financial security more than their peers. They will continue placing importance on digital investments and currencies, extensively researching their assets, staying abreast of macro-economic trends and investing evenly in stocks and cryptocurrencies.
- On-Trend Friends – Approximately 13-23% of future retirees will be driven by purchasing power and a close pulse on all things culturally relevant. This “On-Trend Friends” group will prioritize keeping up with the latest consumer trends and spend more time and money on shopping than their peers. Similar to Practical Achievers, On-Trend Friends value financial security more than the other two personas, as a way to maintain a healthy spending and entertainment budget.
- Relaxed Minimalists – The largest group–31 to 41% of future retiring millennials–will be equally satisfied by the company of their close-knit inner circle and the simple pleasures of their day-to-day routines. Dubbed “Relaxed Minimalists” will value deep relationships more than other personas. They will place less focus on finances and devote more time to hobbies, relaxation and me-time.
- High-Tech Jetsetters – Nomadic and fast-paced in nature, 24 to 34% will embrace the jet-setter moniker and will prioritize travel and be more open to long-term travel than their peers, trusting technology to keep up with friends and family as they move about retirement. Their curious nature, tenacity and commitment to the latest gadgets will carry through into retirement.
Schwab’s Craig sums up by noting that many younger investors made their first-ever investments in the last two years, and that they are engaging with digital retirement planning tools and other resources to help make “retirement uniquely their own.”
Schwab’s first of its kind study focused on three major components: a quantitative survey of 5,000 Americans; in-depth analysis of Schwab data alongside third-party macroeconomic data; and advanced modeling techniques that group generations to forecast future attitudes.
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.