What’s up with millennials and retirement?

Adam Cecil is a staff writer for PolicyGenius, an online insurance broker. He’s also an expert in #millennial finances.

What if I told you that most millennials only planned to work for fifteen years before they retired? You’d probably say I’m absolutely insane, right? Because how could a generation representing one-fourth of the U.S. population and the majority of the U.S. workforce just stop working within the next decade? You may also be one of those so-called millennials, staring at me mouth agape, wondering if your friends all decided to play hooky on their careers without telling you.

The average millennial. (Photo: Ryan McGuire)

And yet, Financial Samurai tells us that the average millennial plans to stop working in fifteen years. That statistic — sourced from Personal Capital’s Retirement Planner tool — is followed by a handful of other unbelievable numbers.

Personal Capital would have us believe that the average millennial expects to spend just $142,272 on a home purchase, almost $80,000 less than the average American home price. They also plan to spend $325,357 on vacations before they retire. If they retire in fifteen years, that averages out to about $21,690.47 per year. Totally sustainable, right? Especially when millennials are dealing with the highest amount of student loan debt, like, ever, and would sell a kidney to get rid of it.

The kicker is that the average millennial (allegedly) expects to inherit $1.06 million. From the Financial Samurai:

It’s all so clear to me now why Millennials emphasize “following their passion,” and “doing meaningful work,” even if they haven’t put in their dues.

So millennials who believe that businesses can have a positive impact on society are… entitled? Honestly, they sound like good kids to me, but maybe I’m just old fashioned.

What’s up with that data?

Let’s get this out of the way: obviously Personal Capital’s data is skewed. Personal Capital collected the data from their online retirement calculator, not by using any kind of accepted surveying method. While their sample size is huge — hundreds of thousands of people, according to Financial Samurai — the sample is self-selecting and the data is inherently biased. Only one in ten people — no matter what generation they’re in — have ever used a retirement calculator, but way more than 10% of Americans plan for retirement.

On top of that, it’s a tool. Just because you put numbers into a calculator doesn’t mean those numbers are accurate. While Personal Capital’s calculator can use existing linked data from bank and retirement accounts, other numbers are more fluid, and can be played with to achieve different results. That’s kind of the whole point of a calculator, is it not?

In any case, we’re given absolutely no other pertinent information about the millennials that used Personal Capital’s calculator — average income, where they lived, how much debt they have — making it pretty much impossible to compare these numbers against other surveys.

What’s up with saving for retirement?

While Personal Capital may want you to believe that millennials are doing a bad job at retirement, that doesn’t seem to be the case. One 2014 study, performed by the Transamerica Center for Retirement Studies, a non-profit primarily funded by the Transamerica Life Insurance Company, comes to the exact opposite conclusion. Transamerica found that only 34% of millennials planned to retire before the age of 65, which is hard to reckon with the idea that the average millennial only plans to work for fifteen years.

Transamerica went so far as to name this study “Millennial Workers: An Emerging Generation of Super Savers.” (Despite that big inheritance coming their way? Hmm.) They’re not kidding — millennials started saving for retirement at age 22, way earlier than Gen X (age 27) and Baby Boomers (age 35 [might as well call them Late Bloomers, amirite?]). It’s actually amazing how much millennials are saving, considering that 47% of millennials say they spend half of their paychecks on paying down long-term debts like student loans.

Retirement planning is hard when you have fourteen babies to feed. (Photo: Ryan McGuire)

Turns out, contrary to contention of a lot of personal finance bloggers out there (including contributors to Forbes, The Fiscal Times, and Dave Ramsey), millennials do, in fact, care about money, and they do, in fact, care about retirement. 90% of millennials see 401(k)s as an important workplace benefit, and two-thirds would switch jobs right now if the other employer offered a better retirement package.

That doesn’t mean millennials are perfect. In a recent Bank of America/USA Today report, only 5% of millennials mentioned “investing” as something they had expertise in. Investing, in case you didn’t know, is absolutely crucial to retirement savings, as it will be one of the only ways millennials will be able to reliably grow their cash over the course of the next few decades.

If you’re a millennial and you want to learn more about retirement, investing, or money in general, check out some of these millennial-focused personal finance blogs:

What’s up with, like, retirement in general?

Our definition of retirement is shifting. Only 23% of millennials plan to completely stop working after retirement. Considering that the definition of retirement is currently “the action or fact of leaving one’s job and ceasing to work,” it’s clear that millennials have a very different conception of retirement than the Oxford Dictionary. This isn’t really news — Arianna Huffington wrote about the need to change our definition of retirement back in 2014.

Transamerica found that 47% of millennials planned to continue working after retirement in order to either stay involved or because they love what they do. This idea — that millennials want to do a job that they feel good about — is what Financial Samurai dismisses in passing. But we’re living in a world where people are living longer, and the traditional retirement age of 65 no longer makes sense. If millennials are literally going to have to work from ages 22 to 70 or 75, why shouldn’t they focus on doing something they want to do?

Pretty much every retirement calculator out there, however, is still focused on that “age 65” rule for retirement, despite the fact that it just doesn’t make sense for most people. You’re going to retire at age 65 and expect to have enough in savings to, what, not work for thirty years?

Millennials know they have to save for retirement. They also know that they’ll have more time to save for retirement than any generation before them. They also know that their version of retirement will probably feature some sort of work, whether it’s part-time or full-time. None of that points to a generation of entitled millennials who are living off of mommy and daddy’s money. Instead, it points to a generation of eighty million people who know what they’re going to have to do to survive in this world — at least, until they can change it.


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