Planning for Retirement? Millennials don’t see the point
(Bloomberg) — Not only have many Americans lost faith in their pre-pandemic retirement plans, but nearly half of those ages 18 to 35 “have to save for retirement until things get back to normal.” makes no sense,” according to a new survey.
For most young respondents, retirement planning has been put on hold — 55% said that, compared to 41% of all respondents in Fidelity Investments’ 2022 State of Retirement Planning survey.
A slice of that next-generation demographic remains optimistic, however, with 38% saying they are more confident about being able to retire now than before the pandemic. This optimism shrinks among Gen X, a demographic that often caters to the needs of both children and aging parents. Only 17% of Gen Xers felt more confident about retirement.
“Gen Xers are in a kind of twilight zone,” said Rita Assaf, vice president of retirement at Fidelity Investments. While Boomers are either in or close to retirement, and Millennials have plenty of time to plan and save, “Gen Xers are stuck in the middle, and are looking at inflation and other economic concerns for the foreseeable future.” And the impact of this on their potential retirement savings,” Asaf said.
Of those who said their retirement plans took a hit during the pandemic, about 30% of young investors estimated it would take a year or less to recover. Among Gen Xers – born between 1965 and 1980 – 27% estimated they were four to five years away from being on track or said they were off track altogether.
Rising prices are also on investors’ minds, with seven out of 10 respondents saying they are very concerned that inflation will create a serious dent in their retirement planning. More than 30% of the 2,622 investors surveyed said they do not know how to keep their savings afloat with inflation.
While 45% of young investors are waiting for things to return to normal before starting saving again, trying the market has historically been a losing sight of a long-term investment strategy.
“It is important to note that the best days of the market are followed by the worst days in the market, which is another powerful reason not to overreact or try to time the market,” Asaf said.
Fidelity said some of the respondents closest to retirement may be too optimistic about how much they can withdraw from savings without burning their nest egg. Nearly 20% of all people surveyed, including 15% of Baby Boomers and 20% of Gen Xers, thought a financial planner would recommend withdrawing 10% to 15% from a retirement portfolio annually. Fidelity suggests planning on withdrawing no more than 4% or 5% of savings each year.
To contact the author of this story:
Susan Woolley in New York [email protected]