Gone is the dream of twilight years spent on the golf course and keeping an immaculate lawn. And at the same time, gone is the guarantee of Social Security and dependable pension plans. Contributing to this shift in the retirement landscape is the desire of twenty- and thirty-year-olds to be involved and serve a purpose with their time and talents when they get older. They often cite wanting to live more now and spend their retirement years staying relevant and useful, even if that means working part time. All of this means their financial needs in retirement will be different.
What Millennials are looking for might be more accurately termed “financial independence,” which doesn’t have a minimum age requirement or a reliance on programs like Social Security in order to achieve it. With Millennials pioneering extreme budgets, lifestyle blogs, and a willingness to invest in new financial tools, like cryptocurrencies, they are breaking the long-standing mold of work yourself to the bone for 40-50 years in order to retire to a guaranteed life of quiet leisure at 65. Financial independence, on the other hand, can be realized in their 40s, 30s, or even 20s.
Financial independence doesn’t necessarily mean leaving the workforce. It means being able to live a desired lifestyle not hindered or dependent on a certain sized paycheck. It’s saving for short-term goals and not just retirement. That may mean working longer, but it’s more likely to include prioritizing travel, expanding life experiences, working in different fields regardless of income incentive, pursuing fitness, enjoying hobbies, and supporting humanitarian, social justice, or environmental movements.
The shift in views regarding retirement and financial independence may also be due in part to having seen how volatile and changeable any market is. What’s “guaranteed” or a safe bet today, might not be tomorrow. And so putting stock (pun intended) into a single plan for their twilight years doesn’t seem a wise move for a large portion of today’s younger workforce.
That being said, the conventional wisdom of saving 15-20% of net income toward retirement (and this can include aggressively paying off debts) still stands as sound advice if pursuing financial independence for the later years of life. More if you’d like to gain that independence sooner. Diversifying those savings is also a wise move. Take advantage of any matched 401(k) program offered by an employer, but also look into contributing to a Roth account or annuity in addition.
Getting creative and thinking outside the box in regard to finances isn’t something new for younger generations, as many struggle to find ways to pay off large student loans. But they are carrying over this determination, creativity, and willingness to self-educate when it comes to saving for the future near and far-off future.