A RECENT global study of UK-based lender HSBC found that while millennials are set to retire earlier than usual, they are seen as having the “worst” retirement prospects compared to other generations.
In the latest report of The Future of Retirement series, “Shifting Sands,” HSBC revealed that millennials expect to retire at age 59, two years younger than the working age average of 61.
The study, which surveyed 18,000 people from 16 countries, classifies millennials as those born between 1980 and 1997.
“The study finds that only 10 percent of millennials expect to continue working after 65--even as their generation faces unprecedented financial pressures and state retirement ages continue to rise around the world,” said HSBC.
Likewise, only 10 percent of people surveyed think millennials are in the “best position” to have a comfortable retirement. This generation has also experienced weaker economic growth than the previous generations, and more than half said millennials are paying for the economic consequences of older generations, such as the global financial crisis and rising national debt.
Forty-two percent see Baby Boomers as best placed for retirement.
Nonetheless, the same survey revealed that 54 percent of the respondents say millennials have a better quality of life now than any previous generations. Millennials also have more flexibility in retirement, with more options to semi-retire and continue to do some work to support themselves.
In what HSBC calls a “reality gap” in millennials’ retirement expectations, most or 68 percent started saving for retirement at an average age of 26.
“Millennials are also more likely than other generations to take investment risks to boost their retirement saving, with 39 percent being very willing to make risky investments to ensure their financial stability, compared to 33 percent of Generation X and 22 percent of Baby Boomers,” the report reads.
In addition, 65 percent of millennials are prepared to cut back on expenses to save, while 62 percent seek information to guide their financial decisions. More than half or 51 percent has actively “moved their money around” to get the best return or deal.
Charlie Nunn, HSBC Group Head of Wealth Management, said millennials face economic challenges, including low interest rates, rising healthcare costs, and potentially less state support for retired people in the future.
“It has never been more important to save for a comfortable retirement. Starting to save early—and saving enough—can reduce the need to have to continue working in later life,” he said.
In the Philippines, while millennials seem to be aware of their future needs, it still doesn’t seem to translate to regular savings and investment, said HSBC, quoting a study recently conducted by a multinational insurance company.
“Filipino millennials seem to pour out their savings to spending that provides instant gratification, such as travel or gadgets. Despite the increasing confidence due to employment security and increasing purchasing power, what millennials need to realize is the need to save before they spend, and the time to start is now,” it said.
To conclude, HSBC’s research identified four actions that people can take to improve their financial well-being in retirement.
One is to be realistic about retirement itself by starting to save earlier and more. Including healthcare costs into retirement planning is also a must.
Second, in saving for the golden years, HSBC advised to consider different sources of funding, spread the risks, and maximize returns.
Third, planning for the unexpected is also a must. HSBC advises millennials to put in insurance to secure retirement income.
Lastly, taking advantage of technology, like using online planning tools, can help one understand his or her retirement funding needs. Seeking professional financial advice is also recommended.