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Millennials Look to Blaze a New Trail in Retirement

Emboldened by starting to save at an earlier age, Millennials apparently have an evolving vision of what it means to retire, with an emphasis on flexibility and lifestyle, according to a new study by Schwab. 

Among the key findings in the firm’s new Retirement Reimagined Study is that while Millennials started saving for retirement nearly a full decade earlier in their mid-20s than Boomers did, they are likely to spend less time managing their personal finances and investments once in retirement. 

Millennials also 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, according to the study. 

“Millennials think of retirement less as a target savings number and date and more like a state of mind or target lifestyle,” notes Jonathan Craig, Managing Director and Head of Investor Services & Marketing at Schwab. “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,” he adds. 

The study is based on three components:

  • a quantitative survey of 5,000 Americans;
  • an analysis of Schwab data alongside third-party macroeconomic data; and 
  • advanced modeling techniques that group generations to forecast future attitudes. 

Shifting Values

Another key difference in how Millennials expect to live in retirement compared with previous generations is rooted in having more flexibility and new experiences in retirement than Boomers, who value stability and consistency. For example, three-quarters of Boomers and Gen Xers are expected to choose stability through home ownership in retirement, while Millennials will prioritize travel (61%), with less than half (48%) predicted to own a home in retirement.

Boomers also maintain a more traditional approach when it comes to finances. With a focus on financial security and traditional investments, nearly half of Boomers (48%) invest in stocks, while only a fraction (5%) invest in digital currencies. In contrast, a quarter of Millennials (24%) along with roughly a fifth of Gen X (19%) plan to invest in digital currencies in retirement.

Millennial Retirement Personas 

Schwab’s study also projects four retirement personas that Millennials could fall into as many of them transition to retirement around 2050.

  • Practical Achievers (approximately 12%-22% of future retirees or 8.7-15.9 million): 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.
  • On-Trend Friends (approximately 13%-23% of future retirees or 9.4-16.6 million): 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 to maintain a healthy spending and entertainment budget.
  • Relaxed Minimalists (approximately 31%-41% of future retirees or 22.4-29.6 million): Equally satisfied by 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.”
  • High-Tech Jetsetters (approximately 24%-34% of future retirees or 17.3-24.5 million): 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,” advises Rob Williams, Schwab’s managing director of financial planning, retirement income and wealth management.