The challenges millennials now face to retire

The current generation of young adults in Australia, also known as millennials, are up against a unique set of circumstances that may inhibit their retirement plans.

A considerable number of this group may find it impossible to ever fully retire due to their inability to amass enough savings to sustain their lifestyle for an extended time. The rise in living expenses, coupled with substantial debts and scant financial reserves among many millennials, suggests an increasing trend of working into their twilight years.

So, what does one need for a relaxed retirement?

As per the Association of Superannuation Funds of Australia (ASFA), an individual will need around $48,266 annually for a relaxed retirement. This figure jumps to $68,014 per annum for couples. Yet, the typical superannuation balance for a 30-year-old millennial at the moment is merely $38,386, which is notably less than the amount needed for a relaxed retirement. Consequently, it seems unlikely that many within this demographic will meet their retirement objectives.

Understanding the root causes

There are various factors contributing to the possibility that many Australian millennials may not fully retire. For one, significant financial liabilities such as student loans and home loans make saving for retirement challenging. With living expenses on a constant upswing, disposable income that could have been allocated towards retirement savings dwindles.

Moreover, Australians are living longer than previous generations, implying that individuals will need to financially sustain themselves for more extended periods. While this is positive for those who remain healthy and active in their later years, it presents a hurdle for those who haven’t saved sufficiently for such extended times.

Working into the twilight years might be a viable option

One potential solution for millennials to ensure financial security in their later years is to continue working. Technological advancements have significantly eased remote and home-based work. This implies individuals can still earn even if they can’t commit to full-time jobs or commute to a physical workplace.

Many might opt to slow down rather than retire completely, continuing on a part-time or casual basis. This can supplement superannuation savings and aid in attaining a more relaxed retirement.

High hopes for life experiences and material possessions

A further reason why numerous millennials might never fully retire lies in their high expectations for life experiences and material possessions. This group values travel, dining out, and similar experiences that come with a high price tag. Additionally, maintaining their accustomed standard of living might prove challenging with a restricted retirement income.

Envisioning your desired retirement lifestyle

For millennials anxious about their retirement possibilities, it’s crucial to take proactive steps. Begin by envisioning the type of retirement lifestyle you wish to have. Would you like to globetrot and relish life’s offerings, or are you content with a more humble lifestyle?

Once your goals are clear, collaborate with a financial planner to craft a plan to realise them. This could involve making extra superannuation contributions, investing in real estate or stocks, or employing other strategies to bolster your wealth and financial stability.

While the idea of a full retirement may seem unattainable to many, careful planning and prudent financial management can ensure that millennials can still look forward to a satisfying and relaxed retirement.

The figures quoted in this article are sourced from the ASFA Retirement Standard, September quarter 2022 report, https://www.superannuation.asn.au/resources/retirement-standard.