The Retirement Myth: Why Millennials and Beyond are Rethinking Traditional Retirement

Australian millennials are facing an unprecedented challenge when it comes to planning for retirement. Many will never fully retire, as they will be unable to accumulate the necessary funds to support themselves for an extended period. With the cost of living steadily increasing and many millennials grappling with large debts and limited financial resources, it is likely that more of the millennial generation will have to work well into their traditional ‘retirement’ years.

How much is needed for a comfortable retirement?

According to the Association of Superannuation Funds of Australia (ASFA)[1], as of March 2023, an individual requires approximately $50,004 per year for a comfortable retirement. This amount increases to $70,482 per year for couples. For homeowners, superannuation balances required to achieve this comfortable retirement at age 67 is $595,000 for a single or $690,000 for a couple. However, the median superannuation balance for a 30 to 34-year-old male in June 2019 was just $38,764 and female, $32,904[2]. Without a concerted savings and investment effort, many people in this age group are unlikely to hit their retirement targets.

Why may this happen?

There are several reasons why many millennials in Australia may never fully retire. Firstly, many are facing significant debts, such as student loans and mortgages, making saving for retirement difficult. The cost of living is also steadily increasing, which means that people have less disposable income to put towards their retirement savings.

Additionally, Australians are living longer than ever before. This means that people will need to support themselves for longer periods of time. While this is great news for those who are healthy and active in their later years, it can pose a challenge for those who have not saved enough to support themselves for an extended period.

Working through your older years may be easier.

One way that millennials may be able to support themselves in their later years is by continuing to work. Fortunately, technological advancements have made working remotely or from home easier than ever. This means that people in white-collar roles can continue to earn an income even if they are not able to work full-time or travel to a physical workplace.

Many people may choose to slow down rather than fully retire, which means that they may continue to work on a part-time or casual basis. This can provide additional income to supplement their superannuation savings and help them to achieve a more comfortable retirement.

High expectations of life experiences and material goods.

Another reason many millennials may never fully retire is that they have high expectations regarding life experiences. Many people in this age group place a high value on travel, dining out, and other experiences that can be expensive. Additionally, people may be accustomed to a certain standard of living, which can be difficult to maintain on a limited retirement income.

What retirement lifestyle do you want to live?

If you are a millennial who is concerned about your retirement prospects, it is important to act now. Start by considering what kind of retirement lifestyle you want to live. Do you want to travel the world and enjoy all that life has to offer, or are you happy with a more modest lifestyle?

Once you have a clear idea of what you want to achieve, you can work with a financial planner to develop a plan to get there. This might involve making additional contributions to your superannuation fund, investing, or taking other steps to increase your wealth and financial security.

While a fully retired life may not be achievable (or desired), with careful planning and diligent financial management, millennials can still enjoy a fulfilling and comfortable retirement or semi-retirement.

Want to know more?

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The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

[1] https://www.superannuation.asn.au/resources/retirement-standard

[2] https://www.superannuation.asn.au/ArticleDocuments/270/2022_Superannuation_Account_Balances_Research.pdf.aspx?Embed=Y