Retirement Anxiety More Pronounced Among Millennials and Gen X
Retirement anxiety is a shared experience across generations, but it’s particularly pronounced among Millennials and Gen Xers. You’re not alone if you’re feeling cynical about attaining financial security in retirement.
Why Millennials and Gen X are so concerned about Retirement
According to the 2024 Annual Retirement Study conducted by Allianz Life, the fear of outliving their money surpasses the fear of dying for most adults in the US.
The study surveyed 1,000 individuals aged 25 and above nationwide, revealing a stark reality: two-thirds of Americans express concern about depleting their financial resources compared to the fear of mortality.
This widespread concern among Generation X and Millennials compared to older generations is easily understandable.
It’s mainly driven by the challenges posed by:
- Economic Uncertainty: Millennials and Gen Xers entered the workforce during economic turmoil, such as the Great Recession and the COVID-19 pandemic, leading to job instability and financial setbacks.
- Rising Cost of Living: Skyrocketing housing costs, healthcare expenses, and student loan debt make it challenging for Millennials and Gen Xers to save for retirement while meeting daily financial obligations.
- Decline of Traditional Pensions: Unlike previous generations, Millennials and Gen Xers have limited access to traditional pension plans, placing greater responsibility on individual retirement savings.
- Longer Lifespans: Increased life expectancy means Millennials and Gen Xers may need to support themselves financially for longer periods in retirement, requiring more substantial savings.
- Inadequate Savings: Many Millennials and Gen Xers have insufficient retirement savings, often due to competing financial priorities and low levels of financial literacy.
- Social Security Concerns: Uncertainty surrounding the future of Social Security benefits adds to retirement anxiety, as Millennials and Gen Xers question whether they can rely on this source of income in retirement.
David Beckerman, Senior Vice President, Investments at David Lerner Associates, Inc., notes, “Current retirees are already experiencing the consequences of adjustments made to Social Security in 1983, which included raising the retirement age.”
As these changes fully impact Millennials and Gen X, individuals opting to start receiving benefits at age 62 will face a significant reduction of up to 30 percent in their full benefit amount (available at age 67).”
How Millennials and Gen Xers Can Prepare for Retirement
Despite the challenges, Millennials and Gen Xers can adopt proactive strategies to secure their financial future.
Here are some practical tips:
- Start Early and Save Consistently
Take advantage of the power of compounding: The earlier you start saving, the more time your money has to grow. Compounding allows you to earn interest on both your initial investment and the interest accumulating over time. Even small, regular contributions can grow significantly over the years.
Contribute regularly to retirement accounts: Set up automatic contributions to your retirement accounts, such as a 401(k) or IRA. This ensures that you consistently save a portion of your income without thinking about it. Consider increasing your contribution rate whenever you receive a raise or bonus. - Set Realistic Goals
Evaluate your retirement goals: Consider the lifestyle you want to maintain and the associated costs. Consider factors like housing, healthcare, travel, and leisure activities.
Develop a realistic savings plan:- Based on your goals, calculate how much you need to save and create a plan to achieve it.
- Use retirement calculators and consult with a financial advisor to help you estimate your needs and develop a savings strategy.
- Make sure your plan is flexible and can be adjusted as circumstances change.
- Diversify Investments
Spread your retirement savings across a mix of asset classes: Diversification helps mitigate risk and can enhance your portfolio’s potential for long-term growth. Consider a mix of stocks, bonds, mutual funds, and other investment vehicles that align with your risk tolerance and time horizon.
Rebalance your portfolio periodically: Over time, the value of your investments will fluctuate, which can alter your asset allocation. Review and rebalance your portfolio to align with your investment goals and risk tolerance. - Minimize Debt
Prioritize paying off high-interest debt: High-interest debts, like credit card balances and student loans, can significantly hinder your ability to save for retirement. Focus on paying off these debts as quickly as possible to free up more funds for savings.
Implement a debt reduction strategy: Consider using methods like the debt avalanche (paying off the highest interest rate debt first) or the debt snowball (paying off the smallest balances first) to systematically reduce your debt. Reducing debt can also improve your credit score and reduce financial stress. - Seek Professional Advice
Consult an investment counselor: Remember, you don’t have to navigate the complexities of retirement planning alone. A professional financial advisor can provide you with personalized strategies, valuable insights, and peace of mind in your retirement journey.
Regularly review and update your plan: Life circumstances and financial markets change, so it’s essential to periodically review your retirement plan with your advisor and adjust as needed. This ensures that your plan remains relevant and effective in helping you reach your retirement goals.
Retirement anxiety is a significant concern for Millennials and Gen Xers, driven by inflation, economic challenges, and inadequate savings. However, by adopting proactive retirement planning strategies, individuals in these demographic groups can take control of their financial futures and achieve greater peace of mind in retirement.
Are you a Millennial or Gen X? Gain more insights and strategies to alleviate your retirement concerns by contacting David Lerner Associates today!
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.