New Schwab Study Forecasts Millennial
Retirement
Millennials have an evolving vision of retirement, different
from previous generations, according to Schwab’s new Retirement
Reimagined Study that uses advanced predictive modeling techniques
to forecast key differences in how Millennials, Gen X and Boomers
will approach saving for and living in retirement. The first of its
kind study also projects four distinct retirement personas that
Millennials could fall into as many of them transition to
retirement around 2050.
Among its key findings, Retirement Reimagined reveals that while
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 likely to spend less time managing their
personal finances and investments once in retirement, as compared
to Boomers or Gen X. Another significant generational shift
predicted by the Schwab study is that 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. “We recognize that Millennials are
approaching preparing for retirement – and living in retirement –
differently and want to help them achieve financial success. We’ve
seen a number of younger investors make their first-ever
investments in the last two years, but we’re also seeing them go
beyond those initial steps to engaging with our digital retirement
planning tools and other resources that will help them make their
retirement uniquely their own.”
Schwab’s Retirement Reimagined’s findings and future personas
are based on three major components: 1) a quantitative survey of
5,000 Americans, 2) in-depth analysis of Schwab data alongside
third-party macroeconomic data, and 3) advanced modeling techniques
that group generations to forecast future attitudes. Knowing that
the seeds of the future are planted in the past, the study digs
into the past lived experiences, attitudes and behaviors of the
Boomer generation and compares that with their current retirement
values and choices. Then, accounting for differences in life
experience over time, the study analyzes the current attitudes and
behaviors of Millennials to forecast the future retirement profiles
of their generation.
Shifting Values in Retirement
One of the key differences in how Millennials expect to live in
retirement compared to previous generations is rooted in the value
they place on having more flexibility and new experiences in
retirement, compared to Boomers who value stability and
consistency, according to Schwab’s study.
Three-quarters of Boomers and Gen Xers alike are expected to
enjoy stability through home ownership in retirement. Millennials,
on the other hand, will prioritize travel (61 percent), with less
than half (48 percent) predicted to own a home in retirement.
Boomers also maintain a more traditional approach when it comes
to finances. Focusing on financial security and traditional
investments, nearly half of Boomers (48 percent) invest in stocks,
while only a fraction (five percent) put money into digital
currencies. In contrast, a quarter of Millennials (24 percent)
along with nearly a fifth of Gen X (19 percent) plan to invest in
digital currencies in retirement.
Millennial Visions for Retirement
Schwab’s study predicts that Millennials will likely fall into
four distinct retirement personas by 2050 when a large portion of
them are shifting to retirement:
- Practical Achievers – approximately 12-22% of future
retirees | 8.7-15.9 million Millennials Intent on stability,
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 | 9.4-16.6 million Millennials Driven by purchasing power
and a close pulse on all things culturally relevant, On-Trend
Friends will prioritize keeping up with the latest consumer trends
and spend more time and money on shopping than their peers. Like
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 – approximately 31-41% of future
retirees | 22.4-29.6 million Millennials Equally satisfied by the
company of their close-knit inner circle and the simple pleasures
of their day-to-day routines, 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 – approximately 24-34% of future
retirees | 17.3-24.5 million Millennials Nomadic and fast-paced in
nature, High-Tech Jetsetters 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.
“As with any generation, every individual will have a different
vision for their ideal retirement, but the key for everyone is to
start saving and investing early,” said Rob Williams, CFP®,
managing director of financial planning, retirement income and
wealth management at Charles Schwab. “If you dream of constant
travel, make that a specific line item in your retirement plan to
ensure you have the funds to make it happen. If you want to
maintain exposure to higher risk assets like digital currencies in
your retirement portfolio, think about how to balance that with
more traditional investments that can provide you with a reliable
source of income when you don’t have a paycheck. And finally, you
prepare for retirement to enjoy it, but it’s important to have a
solid income and distribution strategy so you don’t risk running
out of money in retirement.”
Some key considerations for Millennials as they think about and
plan for retirement:
- Picture retirement as a target financial state, not a
date. Retirement isn’t really a switch you flip at a certain
age anymore – it’s a financial state that allows for the
flexibility to make work optional. It may be a phase in life you
frequent every now and then or push off until you’re really ready
to slow down. Either way, crunch the numbers and start saving to
ensure you’ll have the nest egg you want, whenever you decide to
crack it open.
- First things first, stash some cash. To feel more
prepared for uncertainty or rapid changes—whether in your ambitions
or driven by shifting economic and societal landscapes—have a
financial cushion to fall back on. Generally, a solid emergency
fund means building a few months of savings to give yourself the
time you need to get back on track.
- Grow your money and protect it too. We all want our
money to grow, to last throughout our lifetimes, and if we’re
lucky, to pass on to our loved ones and causes we care about. But
as we near the phases in life where we need our money, protecting
it becomes just as important as growing it. While you look for high
growth investments, remember to also think about how much risk you
can afford. It may be age-old advice, but it’s still true: a “sure
thing” doesn’t exist and it’s important to diversify and balance
your investments to help achieve growth and stability.
- FOMO is not an investment strategy. Investing is about
growing your money over time so it can help you live the way you
desire—not about speculating or chasing the latest investment
trend. Take ownership of your portfolio and be willing to try new
ways to invest your money, but don’t let trends disrupt your
foundation or detract from your future.
- Think long term but re-visit your plan regularly. Strong
results take patience and time. Don’t forget the clear, simple
steps you can take to invest now and start accumulating for the
future. Start with a plan to help you save and invest toward your
goals, and to start that might mean saving enough in a
workplace-sponsored 401(k) to get the match, but be prepared to
adjust along the way. Will your future-self resemble your
current-self? To a degree, yes. But as life evolves, look to see if
your plan for your money is working the way you need it to at least
once a year.
For clients who want to get started planning for retirement,
Schwab offers a free digital financial plan designed to help
investors establish and stay on track toward their personalized
retirement goals.
About the Survey
Conducted a 19-minute, 5,000 person, nationally representative
quantitative study, and analyzed results in combination with
anonymized Schwab investor data and relevant 3rd party economic and
demographic research to form a holistic retirement-related dataset.
With this dataset in place, used a wide range of advanced modeling
techniques to determine both current and future values across
generations, projecting Millennials’ future retirement. Resulting
from these efforts is a generational segmentation (Millennials, Gen
X and Boomers) of the current drivers of happiness and future
values in retirement in addition to four distinct future Millennial
retirement personas.
About Charles Schwab
At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at www.aboutschwab.com. Follow us
on Twitter, Facebook, YouTube and LinkedIn.
Disclosures
This information does not constitute and is not intended to be a
substitute for specific individualized tax, legal, or investment
planning advice. Where specific advice is necessary or appropriate,
Schwab recommends consultation with a qualified tax advisor, CPA,
financial planner, or investment manager.
The Charles Schwab Corporation (NYSE: SCHW) is a leading
provider of financial services, with 33.4 million active brokerage
accounts, 2.2 million corporate retirement plan participants, 1.6
million banking accounts, and $7.69 trillion in client assets as of
February 28, 2022. Through its operating subsidiaries, the company
provides a full range of wealth management, securities brokerage,
banking, asset management, custody, and financial advisory services
to individual investors and independent investment advisors. Its
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Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC,
www.sipc.org), and their affiliates offer a complete range of
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of mutual funds; financial planning and investment advice;
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independent, fee-based investment advisors; and custodial,
operational and trading support for independent, fee-based
investment advisors through Schwab Advisor Services. Its primary
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