Millennials are already thinking about retirement, but are they thinking about the right things?

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Move over baby boomers. Generation X too. The largest group in the United States is now millennials, those born between 1981 and 1996. According to the Brookings Institution, they now make up 22% of the US population, or about 74 million people, slightly more than the Americans. baby boomers (born between 1946 and 1964). and all the others. The economic, electoral and cultural implications are enormous and will be for decades to come.

Naturally, this has attracted the attention of investment companies, who want to market and manage the assets of this large group. After all, and it seems hard to believe, millennials could start retiring in the early 2040s, just two decades from now. What will their retirement be like and will they have had enough?

This is all the subject of a major new study – “Retirement Reimagined” – by investment giant Charles Schwab, which claims that millennials are doing well in terms of preparing for retirement, as they have started to saving in their mid-twenties, earlier than other groups. This means their money will have more time to grow. Of course, the future market rate of return, inflation and other variables will also be determining factors.

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Schwab’s study – a 19-minute survey of 5,000 people – indicates that there will be four types of millennial retirees. I’ll offer a brief commentary at the end of each description.

  • Relaxed minimalists. According to Schwab’s study, this will be the largest group, made up of millennials who are “equally satisfied with the company of those closest to them and the simple pleasures of their daily routines.” They will also “value deep relationships more than other characters. They will focus less on finances and spend more time on hobbies, relaxation and time for themselves.

Sounds good, more time with friends and hobbies. It’s the “less financially focused part” that seems problematic to me.

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  • High-​tech jets. This will be the second largest group. Schwab’s description: “Nomadic in nature and fast-paced, high-tech setters will prioritize travel and be more open to long-term travel than their peers, trusting technology to keep pace with their friends. and their family as they prepare for retirement.Their inquisitive nature, tenacity and commitment to the latest gadgets will carry over into retirement.

Working from home – or on a tropical island – is where you’ll find these digital nomads, for whom working 9 to 5 in an office like their parents is a thing of the past. They’re keen on the “latest gadgets,” says Schwab, but what about committing to, say, hiding 10% of their earnings each month?

  • Practical achievers. This group will be just that – practical – and will emphasize regular saving and investing. But don’t think that means investing in old-fashioned mutual funds, or even exchange-traded funds. Practical directors will invest evenly in cryptocurrencies and stocks and stay on top of macroeconomic trends.

We are talking about a generational divide here. Millennials see cryptocurrencies as the wave of the future, and they might be right. But it’s also worth noting that investment luminaries like Warren Buffett, CEO of Berkshire Hathaway, and J​.P​. Jam​i​e Dimon, CEO of Morgan Chase, is among those who are skeptical of crypto.

  • Trendy friends. This group “will prioritize tracking the latest consumer trends and spend more time and money shopping than their peers.” Schwab says they will work to maintain a “healthy spending and entertainment budget.”

Keep up with the latest trends, spend more on shopping. It sounds funny, but it suggests that this group of millennials are more interested in living for the moment than saving for retirement.

There’s clearly a different mindset at work here, says Jonathan Craig, Schwab’s managing director and head of investor services and marketing.

“Millennials see retirement less as a target number and savings date and more as a target mindset or lifestyle,” he says. “We recognize that millennials approach retirement preparation and retirement life differently and we want to help them succeed financially. »

Here’s another way the millennial mindset differs. While three-quarters of boomers (born between 1946-1964) and Generation X (1965-1980) have emphasized homeownership, less than half of millennials share this point of view. Also, according to the Schwab study, place a higher priority on the ability to travel more – again, live as digital nomads.

Despite the fact that Millennials have generally started saving earlier – a very smart thing to do – navigation hasn’t exactly been easy for this group. The first two decades of the 21st century have seen recessions, terrorist attacks, a real estate crisis and a pandemic that is now in its third year. All of these factors have caused economic disruption and uncertainty, just as most millennials were coming of age. To this we can add current issues like inflation and rising interest rates – new for millennials, given that rates have been low for years. These macroeconomic trends will impact every decision, whether it’s buying a home, getting married, having children and more. And downstream, all of this will have an impact on when, how and to what extent millennials can retire.

Another element that will impact their ability to retire is Social Security, and here Millennials seem to be making a major miscalculation. A 2021 study by insurance and investment firm Nationwide said most millennials think the age of eligibility for full retirement is 52. to have the easy life of the gadgets and trips they dream of.

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