Why millennials should be mapping their retirement today
Written and accurate as at: Apr 19, 2023 Current Stats & Facts
As Millennials navigate an ever-changing economic landscape and face unique financial challenges, planning for retirement might not be at the forefront of their minds. However, starting the process early is critical to ensure a secure and comfortable future. In this article, we will discuss why Millennials should be mapping their retirement today, referencing insights from Deloitte's 2022 Global Millennial Survey.
The Millennial Landscape
Born between 1981 and 1996, Millennials have experienced significant economic turbulence, including the 2008 financial crisis, high student loan debt, and the COVID-19 pandemic. These events have left lasting impacts on their financial outlook and planning strategies.
According to Deloitte's 2022 Global Millennial Survey, 42% of Millennials believe their financial prospects are worse than those of their parents. Additionally, 39% feel that they will never accumulate enough wealth to retire comfortably. These figures underscore the importance of Millennials taking a proactive approach to retirement planning.
Why Millennials Should Plan for Retirement Now
- The Power of Compound Interest
Starting retirement planning early allows Millennials to harness the power of compound interest, which can significantly impact the growth of their savings. Investing in superannuation accounts early on can help Millennials accumulate wealth over time, even if they begin with modest contributions. - Longer Lifespans
Advancements in healthcare and technology mean that Millennials are likely to live longer than previous generations. Longer lifespans necessitate more extensive retirement planning to ensure that savings last throughout one's retirement years. Early planning can help Millennials avoid financial shortfalls later in life. - Job Market Instability
The Millennial generation has experienced substantial job market instability, characterised by frequent career changes, gig economy jobs, and bouts of unemployment. This uncertainty makes it essential for Millennials to plan for retirement independently, rather than relying solely on employer-sponsored superannuation plans or expecting long-term job security. - Rising Healthcare Costs
Healthcare costs continue to rise, making it crucial for Millennials to plan for potential medical expenses in retirement. According to the Deloitte survey, 56% of Millennials are concerned about their ability to access and afford healthcare services in the future. Planning for healthcare expenses in retirement is a key component of a comprehensive retirement strategy. - Financial Independence
Retirement planning is an essential part of achieving financial independence, a goal that many Millennials aspire to. By saving and investing for retirement early, Millennials can create a stable financial foundation that allows them to pursue their passions, interests, and goals without being tied to a traditional 9-to-5 job.
Mapping Out a Retirement Strategy
Millennials should consider the following steps when creating their retirement plan:
- Assess the Current Financial Situation
Before developing a retirement plan, Millennials should take stock of their current financial situation, including income, expenses, debt, and savings. This assessment will provide a clear picture of their financial health and help identify areas for improvement. - Set Retirement Goals
Millennials should establish specific, measurable, achievable, relevant, and time-bound (SMART) retirement goals. These goals should be tailored to their individual circumstances and priorities, such as desired retirement age, target retirement income, and preferred lifestyle. - Save and Invest
To achieve their retirement goals, Millennials must save and invest consistently. This may involve setting up automatic salary sacrifice contributions to superannuation accounts, reallocating funds from non-essential expenses, or increasing savings rates as income grows. Millennials should also consider diversifying their investment portfolios to mitigate risk and optimise returns. - Minimise Debt
Paying off high-interest debt, such as credit cards or student loans, is an essential step in retirement planning. By reducing debt, Millennials can free up funds for retirement savings and improve their overall financial health. Creating a debt repayment plan and prioritising high-interest debt can help Millennials achieve this goal more efficiently. - Stay Informed and Adapt
The financial landscape constantly evolves, and Millennials must stay informed about changes that could impact their retirement plans. This may include monitoring tax laws, investment trends, and economic conditions. Additionally, Millennials should periodically review and adjust their retirement strategies to ensure they remain on track to achieve their goals. - Seek Professional Advice
Retirement planning can be a complex process, and Millennials may benefit from the guidance of a financial adviser. A professional can help navigate the nuances of retirement planning, recommend suitable investment strategies, and provide personalised advice based on individual circumstances.
Millennials face unique financial challenges, but early retirement planning is essential to secure a comfortable future. By starting now, leveraging the power of compound interest, and adopting a proactive approach, Millennials can overcome obstacles and achieve their retirement goals. Deloitte's 2022 Global Millennial Survey highlights the concerns and aspirations of this generation, emphasising the importance of retirement planning in the face of uncertain economic conditions.
By mapping out their retirement strategies today, Millennials can take control of their financial futures, ensuring a stable and fulfilling life after their working years.