Between student loans, increasing housing prices and rising commodity prices, millennials are struggling to start their retirement planning.
Beyond the soaring costs of living, millennials have been facing different world events and challenges from what the previous generations dealt with. Millennials witnessed the rise of social media, climate change, job insecurity, and increasing wealth gap, among others.
These circumstances are probably the reason why the current generation have different expectations when it comes to working and retirement and why saving for retirement has been pushed to the bottom of their priorities.
The question is, how does retirement planning look to the younger generation? We’ll answer this and share a few financial tips for young adults below - read on!
How much are millennials saving?
According to Tan Siew Lee, Singapore youths don’t have a clear understanding of their financial situation and their projected needs in retirement, which could mean financial distress along the way.
In Singapore, only 18% of the millennials surveyed feel confident and in control of their personal finances. Meanwhile, 27% of the respondents noted that their borrowing has increased over the last few months.
It’s no surprise that only 23% of the survey’s respondents in their 20s have set up either a retirement plan or an emergency fund.
Overall, these numbers paint a picture of millennials struggling to support themselves and having a bleak outlook about their financial future.
Why don’t millennials have enough savings for retirement?
While millennials, as a whole, are making an effort to save for the future, the majority of them are falling behind due to several reasons.
Apart from the rising cost of living and soaring property prices, millennials have a lower net wealth-to-income ratio compared to that of previous generations, preventing them from achieving their long-term financial goals.
Economic downturns and the global pandemic have negatively impacted new graduates and younger millennials as well.
Many fresh graduates either have difficulty finding decent-paying jobs or end up taking lower-paying jobs just to get by.
Even though millennials are more educated than the previous generation, their biggest burden remains student loan debt, which is the primary reason many of them fall behind in building their wealth.
What can millennials do to start on their retirement savings?
Some attribute millennials’ lack of savings to their lifestyle choices and spending habits, which often include new smartphone models, coffee from expensive coffee chains, and designer items, among others.
While there’s some truth to this, there are more systematic reasons why millennials have difficulty saving money for the long term.
One is that many companies no longer support insurance and retirement planning for their employees. That means the responsibility for saving for retirement falls on the younger generation.
It doesn’t help that most millennials don’t have financial planning knowledge to begin with, let alone have an idea of how much one needs to tuck away to have a comfortable retirement.
To get the ball rolling on retirement savings, millennials might need to consider creating other streams of income through entrepreneurial ventures, investing, and buying properties.
These days, living on a single stream of income is impossible, much less stashing away a portion of your entry-level salary every cut-off.
While millennials can be wary of investing, many of them are starting to tap into investments as a way of earning outside of their day jobs. All forms of investments involve some degree of risk, so it’s crucial to do research yourself before opening your wallets.
Beyond the CPF payouts that you can expect to receive, calculating your potential expenses in retirement would help you realise the importance of planning for retirement while young. A retirement plan needs to be highly personalised, so a one-size-fits-all approach doesn’t always work.
If you don’t know how much you need for your retirement, consult with a financial planner to determine what’s needed for you to retire comfortably according to your expectations and lifestyle goals.
Conclusion
As a millennial, planning for your retirement may be the least of your concerns right now, but changing that mentality is a step towards a comfortable future.
Even though the odds seem to be stacked against the younger generation, there are easy ways to get started on your retirement planning.
If you want more tips on how to save for retirement, or simply need financial planning tips, feel free to reach out to us! We can connect you with experienced financial advisors who can help you achieve your dream retirement life.