How do millennials approach retirement?
Unlike the generations before them who had a more straightforward outlook, the path towards retirement for millennials looks less certain. However, despite growing concerns about having enough money for a comfortable retirement, the millennials tend to hold unrealistic expectations about their retirement lifestyle.
Earlier this year, the Manulife Investor Sentiment Index (MISI) revealed that 83% of millennials (those aged 35 and below) have a rosy view of retirement, believing that they will be able to maintain or improve on their current lifestyle after they retire. In contrast, older investors appear to become more realistic as they draw closer to retirement age: 44% of investors above the age of 50 expect to scale back their lifestyle when they retire.
However, they are conscious of underlying concerns about inadequate retirement funds. A recent report on The Future of Retirement has shown that 64% of millennials believe they will need to support themselves for a longer period of time when compared to their predecessors. This sentiment is echoed in BlackRock’s Global Investor Pulse Survey 2017, where 64% of Singaporeans worry about running out of money in retirement, the highest proportion in Asia Pacific.
Lifestyle changes - The sandwich generation?
A look at the different lifestyles that millennials have adopted gives us insights into their potential financial situation. In 2015, 71.4% of Singaporean males and females aged 25-29 were single, a drastic increase from 51.7% in 2000. Many are also delaying having children and buying a house. MISI has also revealed more than 1 in 3 millennials (34%) believe that they will need to support their children as well as their parents financially during retirement, as opposed to only 8% for those aged 50 and above. 44% also do not expect to receive any financial assistance from their children.
These numbers paint the picture of millennials being the “sandwich generation” as they juggle to support both their children and their aged parents even after they retire.
Adding on to their financial burden, half of the millennials surveyed also expect that they will still be carrying debt or a mortgage after they retire. In view of these challenges, it is not surprising that 2 out of 5 millennials believe they will run out of money during retirement.
Changing perception on retirement: Millennials taking charge
Millennials are increasingly taking retirement into their own hands. This might be through creating streams of income through entrepreneurial ventures, investing, buying property, working part-time in retirement or creating their own savings plan.
A research by GoDaddy revealed that 74% of millennials have said that they wanted to start their own business in the next ten years, much higher than the global average of 50%. BlackRock’s Global Investor Pulse Survey 2017 revealed that 62% of millennials have begun saving for retirement, and 87% of this group are making additional investments beyond the mandatory CPF requirement.
Lifestyle factors have increased in importance to this generation, which may involve working past retirement age, perhaps in a part-time capacity to enjoy retirement life. While the older generation may scoff at the idea of working pass normal retirement age, millennials see things differently. According to MISI, 74% of millennials planned to continue working in a full- or part-time job after retirement, expecting income from work to contribute nearly 20% of their retirement income.
However, with a sound financial plan put in place, millennials can enjoy a fruitful retirement life without the need to worry about finances.
What’s your game plan?
If the above points relates to you, it is never too early to start planning for your retirement. Whether you have started saving and investing, there is always room for a better game plan.
According to a DBS-Manulife Retirement Wellness Study, 80% of people are not sure how much money they need to set aside for retirement. When you consult with your financial planner, discuss what is needed for you to retire comfortably according to your lifestyle expectations. Creating a retirement plan is highly individualized and a one-size-fits-all approach doesn’t always work.
The official retirement age in Singapore is currently at 67, but a quick poll by Seedly has shown that millennials might prefer to retire earlier. Beyond the CPF payouts that you may expect, crunching numbers to sum your expenses in retirement would help you realise the importance of planning for retirement.
While millennials are more entrepreneurial, savings-oriented and well-connected, changing perceptions and priorities would mean that it has never been more important for long-term financial planning. If you have invested your time and effort to set aside your income as savings and need a little more push, speak to one of our financial consultants today to concretise your game plan for retirement.
For more ways to better invest in your future, start a conversation with a friendly financial planner from Manulife Singapore