New Schwab Study Forecasts Millennial Retirement

Millennials have an evolving vision of retirement, different from previous generations, according to Schwab’s new Retirement Reimagined Study that uses advanced predictive modeling techniques to forecast key differences in how Millennials, Gen X and Boomers will approach saving for and living in retirement. The first of its kind study also projects four distinct retirement personas that Millennials could fall into as many of them transition to retirement around 2050.

Among its key findings, Retirement Reimagined reveals that while Millennials have the jump on Boomers when it comes to saving for retirement by starting to save nearly a full decade earlier in their mid-20s, they are likely to spend less time managing their personal finances and investments once in retirement, as compared to Boomers or Gen X. Another significant generational shift predicted by the Schwab study is that Millennials will be more likely to use their savings to achieve their dream lifestyle and pursue their passions along the way and once in retirement, while Boomers and Gen X will aim to continue accumulating wealth during their retirement years.

“Millennials think of retirement less as a target savings number and date and more like a state of mind or target lifestyle,” said Jonathan Craig, Managing Director, Head of Investor Services & Marketing at Charles Schwab. “We recognize that Millennials are approaching preparing for retirement – and living in retirement – differently and want to help them achieve financial success. We’ve seen a number of younger investors make their first-ever investments in the last two years, but we’re also seeing them go beyond those initial steps to engaging with our digital retirement planning tools and other resources that will help them make their retirement uniquely their own.”

Schwab’s Retirement Reimagined’s findings and future personas are based on three major components: 1) a quantitative survey of 5,000 Americans, 2) in-depth analysis of Schwab data alongside third-party macroeconomic data, and 3) advanced modeling techniques that group generations to forecast future attitudes. Knowing that the seeds of the future are planted in the past, the study digs into the past lived experiences, attitudes and behaviors of the Boomer generation and compares that with their current retirement values and choices. Then, accounting for differences in life experience over time, the study analyzes the current attitudes and behaviors of Millennials to forecast the future retirement profiles of their generation.

Shifting Values in Retirement

One of the key differences in how Millennials expect to live in retirement compared to previous generations is rooted in the value they place on having more flexibility and new experiences in retirement, compared to Boomers who value stability and consistency, according to Schwab’s study.

Three-quarters of Boomers and Gen Xers alike are expected to enjoy stability through home ownership in retirement. Millennials, on the other hand, will prioritize travel (61 percent), with less than half (48 percent) predicted to own a home in retirement.

Boomers also maintain a more traditional approach when it comes to finances. Focusing on financial security and traditional investments, nearly half of Boomers (48 percent) invest in stocks, while only a fraction (five percent) put money into digital currencies. In contrast, a quarter of Millennials (24 percent) along with nearly a fifth of Gen X (19 percent) plan to invest in digital currencies in retirement.

Millennial Visions for Retirement

Schwab’s study predicts that Millennials will likely fall into four distinct retirement personas by 2050 when a large portion of them are shifting to retirement:

1. Practical Achievers – approximately 12-22% of future retirees | 8.7-15.9 million Millennials
   
   Intent on stability, Practical Achievers will prioritize financial security more than their peers. They will continue placing importance on digital investments and currencies, extensively researching their assets, staying abreast of macro-economic trends and investing evenly in stocks and cryptocurrencies.
   
   
2. On-Trend Friends – approximately 13-23% of future retirees | 9.4-16.6 million Millennials
   
   Driven by purchasing power and a close pulse on all things culturally relevant, On-Trend Friends will prioritize keeping up with the latest consumer trends and spend more time and money on shopping than their peers. Like Practical Achievers, On-Trend Friends value financial security more than the other two personas, as a way to maintain a healthy spending and entertainment budget.
   
   
3. Relaxed Minimalists – approximately 31-41% of future retirees | 22.4-29.6 million Millennials
   
   Equally satisfied by the company of their close-knit inner circle and the simple pleasures of their day-to-day routines, Relaxed Minimalists will value deep relationships more than other personas. They will place less focus on finances and devote more time to hobbies, relaxation and me-time.
   
   
4. High-Tech Jetsetters – approximately 24-34% of future retirees | 17.3-24.5 million Millennials
   
   Nomadic and fast-paced in nature, High-Tech Jetsetters will prioritize travel and be more open to long-term travel than their peers, trusting technology to keep up with friends and family as they move about retirement. Their curious nature, tenacity and commitment to the latest gadgets will carry through into retirement.

“As with any generation, every individual will have a different vision for their ideal retirement, but the key for everyone is to start saving and investing early,” said Rob Williams, CFP®, managing director of financial planning, retirement income and wealth management at Charles Schwab. “If you dream of constant travel, make that a specific line item in your retirement plan to ensure you have the funds to make it happen. If you want to maintain exposure to higher risk assets like digital currencies in your retirement portfolio, think about how to balance that with more traditional investments that can provide you with a reliable source of income when you don’t have a paycheck. And finally, you prepare for retirement to enjoy it, but it’s important to have a solid income and distribution strategy so you don’t risk running out of money in retirement.”

Some key considerations for Millennials as they think about and plan for retirement:

1. Picture retirement as a target financial state, not a date. Retirement isn’t really a switch you flip at a certain age anymore – it’s a financial state that allows for the flexibility to make work optional. It may be a phase in life you frequent every now and then or push off until you’re really ready to slow down. Either way, crunch the numbers and start saving to ensure you’ll have the nest egg you want, whenever you decide to crack it open.
   
   
2. First things first, stash some cash. To feel more prepared for uncertainty or rapid changes—whether in your ambitions or driven by shifting economic and societal landscapes—have a financial cushion to fall back on. Generally, a solid emergency fund means building a few months of savings to give yourself the time you need to get back on track.
   
   
3. Grow your money and protect it too. We all want our money to grow, to last throughout our lifetimes, and if we’re lucky, to pass on to our loved ones and causes we care about. But as we near the phases in life where we need our money, protecting it becomes just as important as growing it. While you look for high growth investments, remember to also think about how much risk you can afford. It may be age-old advice, but it’s still true: a “sure thing” doesn’t exist and it’s important to diversify and balance your investments to help achieve growth and stability.
   
   
4. FOMO is not an investment strategy. Investing is about growing your money over time so it can help you live the way you desire—not about speculating or chasing the latest investment trend. Take ownership of your portfolio and be willing to try new ways to invest your money, but don’t let trends disrupt your foundation or detract from your future.
   
   
5. Think long term but re-visit your plan regularly. Strong results take patience and time. Don’t forget the clear, simple steps you can take to invest now and start accumulating for the future. Start with a plan to help you save and invest toward your goals, and to start that might mean saving enough in a workplace-sponsored 401(k) to get the match, but be prepared to adjust along the way. Will your future-self resemble your current-self? To a degree, yes. But as life evolves, look to see if your plan for your money is working the way you need it to at least once a year.

For clients who want to get started planning for retirement, Schwab offers a free digital financial plan designed to help investors establish and stay on track toward their personalized retirement goals.

About the Survey

Conducted a 19-minute, 5,000 person, nationally representative quantitative study, and analyzed results in combination with anonymized Schwab investor data and relevant 3^rd party economic and demographic research to form a holistic retirement-related dataset. With this dataset in place, used a wide range of advanced modeling techniques to determine both current and future values across generations, projecting Millennials’ future retirement. Resulting from these efforts is a generational segmentation (Millennials, Gen X and Boomers) of the current drivers of happiness and future values in retirement in addition to four distinct future Millennial retirement personas.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn.

Disclosures

This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 33.4 million active brokerage accounts, 2.2 million corporate retirement plan participants, 1.6 million banking accounts, and $7.69 trillion in client assets as of February 28, 2022. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC, www.sipc.org), and their affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent, fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.aboutschwab.com.

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