Research shows that millennials may need a reality check when it comes to planning for their retirement.
According to the Natixis U.S. Investor Survey, millennials report that they plan to retire at the age of 59. This is on average, six years earlier than baby boomers expect to retire. While some millennials may be relying on an inheritance windfall to fund their early retirement, and may as a result be living beyond their means in the interim, research shows that 24 percent of baby boomers are relying on financial contributions from their children to assist them in retirement. This miscommunication between baby boomer parents and their millennial children could result in a significant number of disappointed beneficiaries.
Further, many young professionals are not considering inflation in their retirement plans. A failure to account for inflation can result in millennials depleting their savings at a faster rate than originally planned. Young workers must also consider factors such as increased longevity and advances in medicine when planning for retirement.
Interestingly, while the cost of living has increased at an alarming rate, studies have shown that many millennials are “overly optimistic” about their financial futures. Approximately 71 percent of millennials expect to continue living comfortably well into retirement.
Whether parents plan to leave their children a significant inheritance or a modest one, the most important gift they can give is that of communication. Communicating the details of their testamentary intentions can assist their children in more effectively planning for their own retirement.
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