Traditional retirement strategies are out. Now, participants prefer an unconventional post-career path, shows new findings released today by Fidelity Investments.
The firm’s 2024 State of Retirement Planning report argues how the COVID-19 pandemic altered employees’ and retirees’ understanding of retirement. According to the research, 66% of respondents say the pandemic made them “more intentional” when focusing on personal passions and goals for retirement. Across all age groups, two-thirds plan to work for pleasure in retirement, and instead of retiring entirely, hope for a phased transition instead.
This is especially true among younger generations, as 60% of Gen Zers and 58% of Millennials say they no longer envision a traditional retirement. Encouraged by the rise of remote work and from older family and friends, Fidelity reports that these groups are more likely to travel, relocate, or even start their own business in retirement.
With a higher number of future retirees’ planning to relocate, Fidelity says this could be a good time for advisors to help participants understand any impacts to Social Security and Medicare. While retirees can continue receiving Social Security benefits outside the U.S. as long as they remain eligible, Medicare services can be trickier to navigate when permanently living abroad.
“Americans are approaching their ‘golden years’ with more intention and opportunity than ever before,” said Rita Assaf, vice president of Retirement Products at Fidelity Investments. “As more people rethink retirement, with new goals such as living abroad or starting a business, it’s important to consider the potential impacts to their Social Security, Medicare and taxes. We’re encouraged to see a growing understanding of the value in creating a retirement plan early, which helps people map out the best strategy for reaching their goals.”
In looking forward to unconventional approaches for retirement, Americans also expressed confidence when retirement planning. Fidelity points to improving market performance for the newfound sureness, adding that retirement account balances at Fidelity have hit their highest point in the past two years. The research correlates with new findings from Vanguard, which found that account balances grew by 19% by year-end 2023.
Despite the excitement and confidence, some respondents voiced concerns over having adequate savings, noting that a higher cost of living, student loan debt, and other priorities could take precedent over saving for retirement. Given these concerns, all generations in Fidelity’s research reported regrets in preparing for retirement at a later age. For example, Baby Boomers, who on average began saving for retirement at age 43, say they wish they started at age 32. Even Gen Zers, who averaged beginning savings at 20-years-old, expressed regrets for not starting earlier.
Legislative provisions offered in SECURE 2.0 could help participants reach their savings goals, adds Fidelity. A third of Gen Z respondents believe their employer could leverage the legislation by making a matching retirement contribution each time an employee pays down their student loan debt. Emergency savings features and tax credits for small businesses may also help employees get to their targets.
Technological advancements, such as the use of robo-advisors and artificial technology (AI) can assist participants with managing savings or organizing retirement strategies. According to Fidelity, most robo advisor users say the technology has helped them simplify investing (87%), increase their risk tolerance (80%), as well as improve their confidence in reaching investment goals (81%). Younger generations are also twice as likely than their older counterparts to seek financial guidance from digital sources, such as a robo advisor, social media channels or influencers they follow.
Still, participants noted a significant importance in having human advisors available. Four out of five respondents across all generations agree that having access to a human advisor is important for when they have questions, and over three-quarters prefer to work with a human advisor when creating a retirement savings plan.
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