Retirement Planning for Millennials

Worrying stats reveal that millennials may not be saving enough for retirement. Have you started thinking about your millennial retirement plans?

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As a millennial, how confident do you feel with your current retirement plan?

Whether you’ve never given your retirement much thought, or if you want to review any existing plan, there isn’t a better time to do so than now.

While time may be on your side today, it’s also true that the window of opportunity to maximise any financial opportunities for your retirement as a millennial is also closing with each passing day.

Holborn Assets provides retirement advice across 18 global locations. Our experts are here to help you make informed decisions so that when you come to access your retirement fund things plan out as you’d imagined.

Here is what you need to know as a millennial about your retirement. Plus, how to make sure you’re fully prepared for some of the unique challenges ahead which are set to apply to millennials when they retire.

Planning for retirement as a millennial: Key headlines you need to know

What you need to know about retirement planning as a millennial is that people are living for longer and costs are going up.

Even for today’s generation – these factors are causing issues for retirement funds. But for millennials, you will require even more money to achieve a good standard of retirement.

We are on the precipice of a crisis – an ageing population means fewer people in the workforce and more people relying on others to live.

Furthermore, a report from Evelyn Partners found that the average millennial will need to fund 25 years of retirement – an increase of two years.

Despite the total cost of a comfortable retirement set to rise by 150%, the report also states that one in three 30 to 40-year-olds haven’t started saving for any form of pension.

Over 2,000 respondents took part in the study. Gen Z and millennials both said they wished to retire at 60. However, the state pension age is expected to rise to 70 by 2056.

In short: Increasing life expectancies, rising costs of living and wanting to retire early means many millennials will not have enough money to fund their retirement.

Therefore, now is the time to protect yourself from future financial shortfalls predicted for your generation through millennial retirement planning.

Did you know? đź’ˇ: 34% of Millennials say they’re behind on their retirement savings – CNBC

Who are millennials?

Millennials are considered those born between 1981 and 1996. Sometimes, millennials are also referred to as Generation Y.

Don’t fit into this age range?: Holborn Assets offers retirement planning geared towards various life stages. Please check out our main retirement planning hub or contact us so we can point you in the right direction.

What age will most millennials retire?

The state pension age is expected to be 70 by the time millennials come to retire.

While the standard trajectory may look frightening, ultimately, it’s the retirement planning you do now which will control the age at which you as a millennial can realistically retire.

As a millennial, if you start your retirement plan now, it’s also possible to go down the FIRE (Financial Independence Retire Early) route.

Our financial advisers can certainly help guide you regardless of the age at which you plan to retire.

How much will millennials need to retire comfortably?

The figure you’ll need in your retirement fund will need to cover all of your expenditure once you are no longer working. It will need to financially sustain you until the end of your life.

Most young people don’t think about their changing needs as they age. For instance, the fact that healthcare requirements can increase, and that these may vastly differ from your current healthy self.

In general, to work out how much you need to retire, you need to think about:

  • Advanced care coverage
  • Daily living expenditure
  • Healthcare coverage
  • Home improvements
  • Financial gifts to loved ones
  • Financial safety net for unexpected costs
  • Lifestyle purchases
  • Potential for inflation and rising costs
  • Savings

Then, balance all of the above with the time at which you want to retire.

Ideally, you will also have cleared all of your debts by the time you reach retirement, so that the maximum amount of money can be spent on maintaining your lifestyle.

Learn more: How much money do you need to retire?

Millennial retirement savings challenges

The cost of living crisis and rising inflation can make the idea of saving for retirement right now feel less important. However, the fact remains that everyone requires a healthy retirement fund to support them financially once they are no longer working.

Also, not preparing for retirement while you’re young inevitably stores up more trouble for the future.

If you are a higher earner wanting to know your savings and investment options for retirement, our retirement experts can help.

Likewise, our financial advisers can also guide you through any other similar challenges including the uncertainty that high inflation brings.

Read more: Are you a high earner but not rich yet? (HENRY) Discover our financial advice for high earners.

How can you fund your retirement as a millennial?

When you begin your retirement planning with us, we’ll help you work out how much you’ll need in your retirement fund. The figure will depend on your needs during retirement, along with the level of lifestyle you’d like to lead. Our experts will then look at what strategies are needed to achieve your plan.

Over time, we can also help you track the progress of your retirement fund. If you later decide you want to retire early, or make any other changes to your retirement plan, it’s going to be easier to do so with multiple ways of funding your ambitions.

Some millennial retirement goals and strategies to fund retirement can include (but are not limited to) the following techniques.

Budgeting

The word ‘budget’ can feel daunting or even tedious.

But what budgeting simply comes down to is looking at your income and working out your expenditure. In terms of your retirement planning, a budget makes it easy to see how much you can afford to contribute each month.

The typical recommendation is contributing 12.5% of your salary to your pension. What a budget will do is see whether that’s possible, or if you could contribute more to be able to retire early.

The actual amount you should be paying will depend on many aspects, so again a budget is there to provide some concrete ‘yeses’ and ‘nos’. Plus, a budget can see where flexibility is possible, especially during uncertain financial times.

Pensions

Pensions typically provide you with a fixed income from the point at which you start accessing them when you retire until you die.

Lots of pension types exist. Your access to each type will depend on your employment status, and even what’s been discussed with you thus far.

Some of the pension types include:

  • Defined benefit pensions
  • Defined contribution pensions
  • Expat pensions
  • NHS pensions
  • QNUPS
  • QROPS
  • SIPPs
  • UK state pension
  • Workplace pensions

Depending on your employment history to date, you may also have different pensions scattered all over the place. The advice here is not to leave it until you need to claim your pension to get a clear sense of your total pension funds.

Rest assured that during your retirement planning session, our experts can help you make sense of what pensions you currently hold, and whether or not any adjustments could be of benefit.

Discover: How many pensions can I have?

Investments

One of the best ways to top up your pension fund and provide a more comfortable lifestyle in retirement is through investing.

Depending on the investment, it may end up providing the bulk of your retirement income.

Some of the investment types to consider include:

  • Business investments
  • Bonds
  • Commodities
  • Digital currencies
  • Index funds
  • Mutual funds
  • Property
  • Stocks

The key to investing for retirement as a millennial is to choose investments where the compound interest can be left to grow.

Inherited Wealth

As a high net worth (HNWI) or ultra-high net worth individual (UHNWI), you may also be set to inherit wealth which could be used to fund your retirement.

Retirement planning along with our wealth management services can ensure the potential of any inherited funds is maximised.

In contrast, inefficient tax strategies, or simply a lack of financial planning could limit even the most sizable amounts of inherited wealth.

Discover: Family wealth management

Tax Efficiency

Do you suspect you are paying too much tax now? Are you even aware that tax efficiency is even a thing?

Think of becoming more tax efficient as a form of reverse passive income. That is, by adjusting what you are currently spending money on you actually earn money back without having to work more.

In short, paying less tax is one of the best ways to not only give yourself an instant pay rise but also be able to put more money away for retirement. But unless you consult with our tax experts, it’s impossible to know whether your current system is efficient or not. This also applies if you’re an expat.

Advantages of millennial retirement planning

As a millennial planning your retirement, there are a lot of benefits which apply to your age group more so than others.

In tangible terms, we’ve mentioned the ability to let compound interest do its thing. Plus, having access to more investment options.

Even still, here’s a summary of why you’re in the best position to start retirement planning today compared with leaving your plan for a few years.

You’re at the perfect age to start your retirement plan

Because you’re still young, if you start your retirement planning today you are set to benefit the most.

Compare this to someone who may be 10 or 20 years older than you, suddenly realising they haven’t given their retirement much thought.

While all might not be lost, the available options will be limited to plug any gaps. Ultimately, the potential of their retirement fund will be vastly reduced, which also causes a lot of stress and worry.

But as a millennial, the hands of the clock are effectively pushed back to midnight. This means you can arrange a meeting with one of our retirement experts today, and we can put you on a strong path from the start.

Imagine how relieved your future self will be for taking control now.

You benefit from better information sharing

As a millennial, you were one of the first generations to grow up with the internet.

What this means is that it’s easier to share information, and even be introduced to helpful life hacks than it was for your parents or grandparent’s generation.

For instance, there is a wide range of financial gurus with their own blogs, YouTube channels and podcasts. All of which have likely mentioned retirement strategies alongside other financial topics.

While no substitute for independent and qualified financial advice, it’s a major positive to be in an era where financial subjects are now being discussed so openly.

Even being made aware that starting retirement planning at a young age is important, may lead you to our retirement experts much earlier than would have been the case. This allows your portfolio to gain the maximum benefit.

You may be interested in: How to generate passive income for retirement

Golden opportunity to dodge the future millennial retirement crisis

If the above hasn’t done enough to persuade you that now is the time to start planning your retirement – just remember the above predictions for millennial retirement.

That is, people are living longer, costs are going up, and many people your age plan to retire at least 10 years earlier than the predicted state pension age for millennials.

The question is, how will any of this be possible without advanced planning? You can probably guess the answer is it won’t be.

Even though the current cost of living crisis along with rising inflation can make it tough to think ahead, we’d still encourage you to focus on your retirement. It’s a lot easier to make gains now compared with trying to frantically plug gaps in your finances as you age.

Retirement planning tips for millennials

It’s fair to say there’s a lot to be enthusiastic about as a millennial taking the time now to plan ahead for retirement. As with anything, putting the work in now means fewer chances of nasty surprises in the future.

So, you should definitely congratulate yourself for taking responsibility rather than ignoring your retirement until it’s too late.

Want to know how to use your millennial status to gain the maximum benefit where your retirement planning is concerned? Here is what we want you to know.

Don’t use your (current) young age as an excuse to do nothing

Have you ever seen skincare experts advise young people to wear SPF now, so that as they age they reduce skin damage from the sun?

This advice comes from real-life experience of not taking the chance to change course from where someone is today. Believe it or not, anything involving your future financial health works much the same.

It can feel a bit much putting in the effort now to prevent a problem you don’t yet have. But these small steps you take now will have a huge impact when you need it the most.

Take the power of compound interest for example – investing today and compounding that amount over time results in a huge amount of money saved that has earned interest ready for your retirement.

As the famous Chinese proverb goes, “The best time to plant a tree was 20 years ago. The second best time is now.”

Do use professional advice

We mentioned above that there are now endless ways to learn more about money and finance, including online. These sources can be helpful, and can inspire you to take your finances seriously.

But when it comes to making any major decisions, only a financial adviser who is regulated in your country should be the one to guide you. That’s because you want to be sure that the advice is coming from a trusted and informed place. If you invest in an unreputable scheme or make unwise decisions, it could seriously harm your finances.

Likewise, there’s no recourse for following the advice of online gurus or even forums, especially if things go wrong.

Find your comfortable risk level

Our final tip for millennial retirement planning is that the bonus of time means you can experiment with risk levels to find what works for you.

In contrast, when someone is nearing retirement, lower risk levels meaning lower returns tend to be the preferred option for investments.

While you should always consider the risk levels of all investments carefully, you equally won’t have the opportunity to diversify your portfolio to the same degree as you age.

Millennial retirement planning FAQs

Want to learn more about how you can plan for your retirement as a millennial?

We’ve answered some of the most common queries below.

Why are millennials not saving for retirement?

Rising costs of living are certainly one of the reasons why millennials aren’t saving for retirement, let alone have emergency savings should something unexpected happen. However, it has long been the case that many people don’t consider their retirement when they are young.

As one of the biggest makes we see in retirement planning, we urge all millennials to pay attention to their retirement plan today.

Remember, you can always adjust the amount you pay into your pension depending on your current financial situation. Even contributing something is better than nothing, especially with inflation working in your favour where savings and pensions are concerned.

Will millennials be able to retire?

The current trajectory for millennials who don’t plan ahead isn’t good, especially with the state pension age predicted to rise to 70 by the time that millennials retire.

However, this outcome can be drastically changed for the better if any millennials reading don’t delay in planning for retirement and an investment strategy. Plus, ensuring that any retirement plan is reviewed regularly.

Millennial retirement planning mistakes to avoid

It probably won’t come as a surprise that the biggest mistake to avoid with retirement planning is not having a plan at all, along with not starting early enough.

With time currently on your side, now is the time to ensure you’re prepared for the predicted challenges of millennial retirement that we’ve mentioned above.

Millennials can consider themselves prepared for retirement if they meet a number of conditions. This includes having a retirement plan in place which is regularly reviewed and adjusted to ensure their projections remain on track. The plan must account for all predicted expenses, plus have flexibility for rising costs, longer lifespans and unexpected expenses.

If that doesn’t sound like you, don’t worry! Our retirement experts here at Holborn Assets are only a call or a click away.

Gen Z (anyone born after 1997) have a slightly better advantage than millennials. Though, will likely face many of the same retirement fund shortfall challenges that will apply to millennials.

The best thing that Gen Z can do to prepare for retirement is to create a plan early. Various pensions, savings and investment options exist.

Our retirement experts can help you decide what options are right for you. It’s also never too early to contact us either, including if you belong to the Gen Z generation.

Holborn Assets – Calling all millennials to start their retirement planning with us today

If you’re a millennial wanting to get their retirement plan on track, then you’re in exactly the right place to receive award-winning financial advice.

Holborn Assets has locations across the globe including the UK, EU and the UAE. We’re keen to help you as soon as possible so that as a millennial you can receive the maximum benefit of time.

For any help or advice with anything we’ve mentioned above send us a message and our team will be in touch shortly.

You can also keep up to date with our latest financial news and advice over on our Instagram, YouTube or LinkedIn channels.

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