Retirement once stood as a time when you could stop working and enjoy your golden years until you passed away. But it might be a thing of the past.
Fifty-two percent of baby boomers are expecting to earn an income when they retire, says a study from PGIM Investments. Behind them, 58 percent of Gen Xers plan to work once they hit retirement.
“While changes in retirement expectations are often driven by pure economics, these study results also suggest a mind shift in how people are thinking about retirement,” says Stuart Parker, CEO of PGIM Investments. “The asset management industry will need to rethink the way that it does business and bring products and services in line with changing customer needs.”
The study found that when it comes to when they will retire, Americans don’t have an age in mind, but are thinking about another kind of number.
“Pre-retirees are more likely to base their decision about when to retire on their wealth rather than their age,” the survey says. Half of Gen Xers and 62 percent of millennials say they will retire when they have enough money saved up for it. Historically, retirement starts when benefits kick in, usually around 62 years of age.
Prepping for retirement isn’t easy for up-and-comers
In the past, retirees would hit a magical age and an influx of government-assisted income would pour in, usually from Social Security and pension plans.
The PGIM study says those traditional benefits are important for current retirees, but not those who are still in the workforce.
“Social Security benefits are the most critical source of income for 61 percent of retirees,” the study says. “Only 70 percent of Gen Xers and 51 percent of millennials expect Social Security benefits when they retire.” Millennials are relying on investments to get them through retirement, not Social Security.
The uncertainty of retirement is a cause for concern as well. More than half of pre-retirees (53 percent) don’t know how much they’ll need for retirement. Almost 1 in 5 Gen Xers aren’t saving for retirement at all. Even as they put off preparing for retirement, 79 percent of pre-retirees admit that they should be doing more.
The lack of preparation is what leads to the huge divide in expectations once retirement age comes around. The study says that current retirees who are living their “dream retirement” started saving an average of six years earlier than others who aren’t happy in retirement.
Debt is crushing retirement dreams
Saving for retirement is hard when mounting debt is holding you back. According to the study, one-third of pre-retirees say paying off debt is one of the most challenging parts of retirement saving.
“Paying off debt will likely become more important for each subsequent generation due to the ballooning of student loan debt,” the study notes. “Student loan debt often forces young couples to put off purchasing a house as well as putting down a large down payment when they do. As a result, we can expect even more mortgage debt to be carried into the retirement years.”
Since the debt load will carry on with us long into retirement, we’re already planning on working well into our golden years to make sure we can afford to live. Because younger generations are relying less on government help, they’re finding other means of income to get them through, like investment payouts and self-employment.
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