In today’s changing economic climate, younger generations are facing new obstacles in saving for retirement. In contrast to previous generations, Millennials are set to have fewer Social Security benefits, as well as less personal retirement savings from a 401(k) or other defined contribution plan, due today’s low returns market, and increasing medical costs. As a result of these obstacles, many Millennials worry about the security of their retirement future.
A recent study has shown that more than 60% of Millennials are unsure about when they will be able to retire, if they even get the chance at all. While 59% or millennials making $150k+ a year believe that will be financially secure enough to retire when they choose, only 19% of those making less than $35k a year feel this same level of security.
A large portion of this lack of retirement preparedness stems from an imminent decrease in pension and Social Security benefits. This lack of faith in government-sponsored benefits is understandable, considering that the Social Security Old-Age and Survivors Insurance (OASI) trust fund is set to run out in 2035, eight years before the first Millennials reach retirement age. Furthermore, the Disability Income (DI) and the Health Insurance (HI) trust funds are both set to run out in 2023, a full twenty years before the first Millennials reach retirement age. While there is a good chance that these programs will be officially retained throughout Millennial retirement, they will all have to be restructured to make up for the lack of funds. This means that the program benefits will be decreased, while workforce taxes are increased over the coming years. This means not only fewer benefits in retirement, but also less pocketed income for today’s workforce, potentially forcing some to reduce their annual retirement contributions.
Also, despite the reduced government benefits, increasing healthcare costs, and low-returns market, close to half (46%) of Millennials have not yet started saving for retirement for various reasons, the largest of which is wanting to pay off current debts before starting retirement saving.
In contrast to this, in an effort to combat the current economic conditions, close to two-thirds (63%) of Millennials have actively sought out information to guide their financial decisions and retirement planning, in comparison to only 34% of Baby Boomers. When seeking financial guidance, Millennials tend to ask for the most help with calculating their needed retirement savings (32%), finding strategies to help pay off their debt (32%), creating a retirement savings strategy (31%), and determining appropriate investments to boost their savings (28%).