There’s a difference between saving and planning for retirement, and Millennials don’t know it. Most Millennials are saving for retirement, but that doesn’t mean they’re on track to enjoy one that’s financially secure, according to a national study recently issued by the Insured Retirement Institute (IRI) and the Center for Generational Kinetics.
Millennials—Americans ages 20 to 37—are falling short when it comes to planning for retirement, and this could have big implications for their future financial security.
While 68% of Millennials said they are saving for retirement, only 29% are actively planning for retirement, the report found. At the same time, many seem to be developing unrealistic expectations about life in retirement. Most Millennials seriously underestimate how much money they will need for their retirement years. Seven in 10 said they will spend less than $36,000 per year in retirement. That’s 30% less than the current national average of $46,757 for people ages 65 to 74.
“This study debunks the myth that Millennials are not thinking about retirement,” says Jason Dorsey, Millennial expert and chief strategy officer of Center for Generational Kinetics. Millennials are in fact aware of retirement, but their approach to planning varies wildly from that of previous generations—and, Dorsey says, “It’s not very realistic.”
More than one-quarter of Millennial respondents said they are counting on winning the lottery or receiving monetary gifts to fund their retirement years. More than half (56%) believe they will not be able to retire when they want to, and more than one-quarter (28%) think full retirement is impossible. The majority of Millennials said planning for retirement is more difficult than sticking to a diet.NEXT: Would Millennials prefer Warren Buffett or Oprah Winfrey as an adviser?
When it comes to working with a financial professional, 62% of Millennials would like an adviser to walk them through every step of the retirement planning process, and 87% said it is important that an adviser be willing to meet them in person. Only 19% said they are likely to use a robo-adviser.
About half of Millennials (48%) would pick Warren Buffett to be their financial adviser, and 32% would choose Oprah Winfrey. Baby Boomers, on the other hand, are wildly enthusiastic about Buffett (77%) and less keen on Winfrey (15%).
“These sobering statistics seem to be indicative of a generation that is struggling to manage competing financial demands,” says Cathy Weatherford, president and chief executive of IRI. “Many Millennials are still juggling student loans and other debts, and so planning for retirement is not their top financial priority yet.” But as retirement requires decades of attention, Weatherford emphasizes that Millennials need special help getting started, with specific savings goals and financial plans.
IRI and CGK surveyed 1,110 Americans ages 18 to 65, with a 10% oversample of Millennials, ages 20 to 37 in August. The study can be downloaded from IRI’s website.