Millennials are optimistic about retirement, according to a recent report from Charles Schwab. Specifically, 76 percent of surveyed young adults said that they believe they will have a better financial future than their parents, and the average Gen-Y respondent expects to retire at age 60. The latter is a somewhat ambitious goal considering that it would mean exiting the workforce five years earlier than the traditional age of retirement, even as many financial experts are now recommending waiting until age 70.
Delaying retirement, if possible, can be a smart decision since it will help ensure that you receive the maximum Social Security benefit and also provide a few more working years (income) to pad your nest egg. While postponing retirement could therefore put many Millennials on a firmer financial standing in old age, one reason why some of the respondents in the Schwab poll might still be able to achieve a comfortable retirement as early as age 60 is because these young adults are already making wise financial moves. For example, 64 percent of surveyed Millennials said that they will often hold off on a discretionary purchase and instead set the money aside for retirement.
Nearly half of Gen-Y respondents also said that they do additional work to boost their savings, and around one in three reported that they limit their vacations and traveling in order to set more money aside. Similarly, a new Bankrate poll found that Millennials were a lot more likely than other generations to say that they are saving more for retirement today than they were a year ago, and a recent Principal Financial study even found that some young adults are regularly setting aside at least 90 percent of the maximum the IRS will allow to be placed in a 401(k), IRA, and other tax-advantaged savings vehicle each year.
Since only around 9 percent of 401(k) plan participants are estimated to have annual contributions that come within 10 percent of the deferral limit, these “super savers” are likely to be well ahead of the vast majority of Americans in terms of retirement readiness. Jerry Patterson, a senior vice president at Principal Financial, added that “There is no better advice I can give anyone than save more, earlier. These super savers are making sacrifices today that should help set them up to have the freedom to do the things they want in the future.”
Sources: Charles Schwab, Bankrate, Principal Financial
Post author: Charles Couch