Talking about the “R” Word: Millennials Share Their Thoughts on Retirement

What does retirement mean to you? Care to share your thoughts on retirement? AllBusinessBanking recently interviewed people in their twenties from different parts of the country and asked them a series of questions about retirement and savings.

What is retirement?

Before talking about your thoughts on retirement, it’s important to answer the question, what is retirement? The great dictionaries of the English language, Merriam-Webster, Cambridge and Oxford, all mention retirement as being a “withdrawal … from active working life” or the “act of … stopping working.” Yet there’s a huge difference between the dictionary definition of retirement and the retirement that millennials see for themselves.

“Retirement means to me the flexibility and the freedom to essentially do what I want when I want and not be held back by financial constraints.”

Our interviewees described comfort and flexibility as being important elements of the retirement that they envision for themselves. Charles, 28, in Boston, Mass., mentioned being “financially comfortable” in his definition of retirement while Zach, 27, in Evanston, Ill. mentioned, “retirement means to me the flexibility and the freedom to essentially do what I want when I want and not be held back by financial constraints.”

“I don’t think my career ambition or my health are likely to cease at 65.”

Aside from being comfortable, there’s another big difference between our interviewees’ millennial-style retirement and the dictionaries’ definition of retirement—none of them wants to stop working. Tim, 28, in Washington, D.C. wrote, “I don’t think my career ambition or my health are likely to cease at 65.” Charles in Boston added, “in this day and age, [65] is not that old.” Andrew, 27, in Tampa, Fla. mentioned that he’d like to volunteer during his retirement while other interviewees felt that retirement would be a great time to do part-time work or pursue passions.

That said, despite not wanting to stop working, all of our interviewees when asked about their thoughts on retirement were optimistic and confident about not having to work full-time into their old age. Saffan, 27, in Austin, Tex., felt he could “definitely hit” his retirement goals and some of our respondents felt confident enough to retire before 65, potentially at 60, or even earlier.

How much will retirement cost?

“Healthcare costs in the U.S. are substantially high.”

Just like there’s a huge difference in the cost of living between Columbia, Md. and Columbia, S.C., there were huge differences in the amount of money that our interviewees thought was necessary to ensure a comfortable retirement.

Randall, 27, in Scottsdale, Ariz. felt that $720,000 might be enough for the average person to have going into retirement while Tim in Washington stated that “somewhere between $2 million and $5 million is the correct amount for a comfortable retirement.”

Why such a massive gap? Is Washington really that much more expensive than Scottsdale? A big part of the difference between Randall’s and Tim’s estimates derives from different savings strategies. Tim’s savings strategy assumes that you’ll accumulate and invest a large pool of money before retiring and will essentially live off the returns from your investments during retirement. The advantage of this method is that you’ll always be making returns on your investments, even if you live for 20, 25, or 30 years (or more) after retiring.

Randall’s method, on the other hand, requires a lot less money but assumes that you’ll be living a fixed number of years (with fairly fixed expenses) after retiring (in this case, 20). It’s fine if you live for 15 or 20 years after retiring but could be challenging if you end up living for another 25 or even 30 years. That said, the lower amount is obviously a much, much more attainable goal for most people.

Additional Costs

Our interviewees when asked about their thoughths on retirement also stated that it is important to take care of living expenses heading into retirement. Zach in Evanston feels that having “requisite life expenses [such as paying off a house] already taken care of” before heading into retirement is an important part of financial planning. Several interviewees also mentioned figuring rising healthcare costs and the need to plan for these into their personal retirement strategy. According to Saffan in Austin, “healthcare costs in the U.S. are substantially high” thus it’s important to plan ahead so you can use your “money to be able to do things that you love” and not on medicine, doctor’s and hospital visits, and other healthcare-related costs.

Savings Advice and Strategies

“As early as possible … because you can use less money and with compound interest still make more money in the future.”

To round out this post, we asked our interviewees if there was any advice that they might like to share with our readers.

All our respondents commenting on their thoughts on retirement agreed that they felt it would be best to start saving as soon as you start working, whether that’s in your early 20’s or even sooner, such as during a part-time or summer job as a teenager. As Randall in Scottsdale said regarding the right time to start saving, “as early as possible … because you can use less money and with compound interest still make more money in the future.”
Interviewees further advised readers to do their best to avoid unnecessary losses, such as brokerage fees or commissions on trades.

Our respondents also discussed taking advantage of employer benefits and the need to diversify away from standard savings accounts. Christine, 27 in New York, N.Y. suggests readers “start a 401(k) with their company and … invest the highest percentage that their company matches.” Saffan in Austin added that he would advise friends and peers to “take advantage of the company match, it’s essentially free money, and make sure that you understand what the vesting period of that 401(k) is.” On a separate note, Randall highlighted that money market and brokerage accounts are great alternatives to traditional retail savings accounts.

When asked if there is anything they would have done differently, several of our interviewees expressed regret at not having started saving sooner or at not having saved more in their first few years of employment.

That’s it for now, let us know in the comments if you have any additional thoughts on retirement. We’re planning on posting some more retirement-focused content later this fall, so stay tuned!