Many Millennials, Gen Xers Don’t Expect to Receive Social Security
Yet, a significant number are not saving for retirement at all.
While more than half of pre-retirees expect to continue working in retirement, a mere 6% of retirees actually hold down a job, PGIM Investments, the investment business of Prudential Financial, found in a survey.
Fifty-two percent of pre-retiree Baby Boomers, 58% of pre-retiree Gen Xers, and 43% of pre-retiree Millennials expect to work part-time or full-time during retirement. PGIM says the high expectations for work may be due to fears of Social Security benefits being reduced—or not continued at all. Only 51% of Millennials expect to receive Social Security.
“While changes in retirement expectations are often driven by pure economics, these study results also suggest a mind shift in how people are thinking about retirement,” says Stuart Parker, president and CEO of PGIM Investments. “To help them bridge this gap, the asset management industry will need to rethink the way it does business and bring products and services in line with changing customer needs.”
The survey also found that pre-retirees are relying more on how much money they have saved than reaching a certain age to decide when to retire, with this being the case for 50% of Gen Xers and 62% of Millennials. In contrast, the majority of current retirees decided when to retire based on their age and eligibility for Social Security and other benefits.
Twenty percent of Millennials and 9% of Gen Xers want to start a business in retirement. Additionally, 39% of pre-retirees would like to volunteer in retirement.
Fifty-one percent of retirees say they are “living the dream.” On average, this group started saving six years earlier (age 40) than those not as enchanted with retirement (age 46). They are also likely to have pensions and other sources of income, to work with a financial adviser, to be more willing to take risks and to be more knowledgeable about investments.
The top lessons retirees would like to pass on to pre-retirees are save more, start saving earlier, and plan on retiring later.
Social Security will be the most critical source of income for 61% of pre-retirees. However, only 70% of Gen Xers and 51% of Millennials expect Social Security benefits when they retire.
While Millennials are the least likely to rely on Social Security for retirement income, nearly one in three are not saving anything for retirement. More than one-third say they do not see any point in saving for retirement because anything can happen between now and then. Additionally, nearly one in five Gen Xers are not saving anything for retirement.
This lax approach to retirement saving is surprising, given the fact that Gen Xers think they will need $2.5 million to retire, and Millennials, $1.1 million. Fifty-three percent of pre-retirees are unsure how much they will need to retire, and they give themselves a grade of “C” in terms of their retirement preparedness.
Fifty-one percent of retirees said they retired earlier than they had planned, with 50% of this group saying it was more than five years before their target date. In many cases, the reasons were involuntary, including health problems (29%), layoffs or restructurings (14%), the need to care for a loved one (13%) and the inability to find a new job (10%).Prudential’s 2018 Retirement Preparedness Survey can be downloaded here.
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