Retirement? Fat Chance, Say Millennials

There was the buggy whip. Then the typewriter. Some say ATMs are doomed. Will retirement be the next staple of daily life to disappear?

The vast majority of millennials intend to work in retirement either for income, to keep busy, or to pursue a passion, according to a report from Merrill Edge. Millennials may perfectly turn the tables on the current crop of retirees, 83% of whom have never worked a day since calling it quits. Some 83% of today’s young adults say continued employment is baked into their plans.

Losing retirement would be a bigger disappearing act than losing the buggy whip and the like, for sure. Technology is not making retirement obsolete; low interest rates, lackluster savings and longer lives are the moving forces—and there is no easy answer. Nearly one in five millennials believe they must hit the lottery to retire in comfort, Merrill Edge found.

A difficult jobs market for young adults is part of the story too. Half of those ages 18 to 24 say they will need a side job to save enough, according to the report, based on interviews with “mass affluent” 18-to-34 year olds. Mass affluence is defined as having investable assets of at least $50,000, or at least $20,000 in investable assets with annual income of $50,000 or more.

Millennials have got the message on saving: They started younger than boomers or Gen X, and they are three times more likely to rank an employer’s retirement plan as the most important benefit, Merrill Edge found. They also have little faith in Social Security and would embrace mandatory savings plans.

However strong the savings message, though, there seems to be a disconnect between saving and saving enough. Three in four millennials believe they will need no more than $1 million to retire in 30 or 40 years. Yet even if inflation stays at a tame 2% the entire time, $1 million in 35 years will have the buying power of about $500,000 today. That’s probably not enough of a nest egg, given the soaring cost of health care and even longer lives in the future.

Planning to work past age 65 or even 75 is a key part of the solution. But not everyone can do that. Even if you can work that long, beefing up savings today will only help. A good target is saving 15% of pay each year. Consider starting by saving enough to capture the full company match in a 401(k) plan, and then opt to automatically increase savings by 1% or 2% of pay each year until you hit 15%. You may find that you won’t have or want to work forever.