Millennials Want to Retire at 50. How to Afford It Is Another Matter.

Although Devangi Patel, 33, has only been working as a cardiothoracic anesthetist at a large medical center outside of Atlanta for two years, her goal is to be able to afford to quit her job by age 50.

“This is the American dream for me,” she said.

dr Patel isn’t alone in her quest to become financially independent — and she’s doing so at a relatively early age. It seems that a generational shift is in full swing: many millennials are not aspiring to retire in their mid-to-late 60s like their parents. Instead, many with professional careers are trying to quit their job at 50 and work for themselves or take on a lower-paying role that better suits their interests, studies show and financial advisors find.

“I want to get to a point where I don’t have to work for money and can work for pleasure,” said Dr. patel

But achieving that goal was more difficult when Dr. Patel expected. Though she pays into 401(k) and individual Roth retirement accounts, invests in stocks with a brokerage account, and maxes out her health savings account, she’s also paying off a $250,000 medical school loan and paying for her wedding in December.

While many millennials, like Dr. Patel, in her 50s, wanting financial independence isn’t easy to achieve, said Christopher Lyman, a board-certified financial planner at Allied Financial Advisors in Newtown, Pennsylvania. “I’ve had a lot of people come in and say, ‘I’ve read these articles. I see people doing that. I want to do the same,’” said Mr. Lyman. While he never tries to dissuade clients, he does express some realism – that achieving that independence by age 50 will most likely need to save 50 to 60 percent of their salary.

Millennials, born between 1981 and 1996, entered their professional lives during the Great Recession, navigating a world where traditional routes to wealth, such as home ownership, are out of reach for a greater percentage of them than they were a generation ago.

Part of their attitude is also one of insecurity: they are witnessing major economic changes as they try to establish themselves. And they want to enjoy a post-career lifestyle sooner rather than later.

“It requires saving as much as possible and spending as little as possible, and doing both as quickly as possible,” said Mr. Lyman.

While some millennials on this journey identify with the movement known as FIRE — financial independence, early retirement — others, like Brit Minichiello, have broader aspirations.

“With traditional FIRE, we wouldn’t spend money and throw it away forever,” said Ms. Minichiello, 36. Instead, she is aligning her savings with her desire to enjoy life before she turns 65, which is why she and her husband Dave, 42 , recently focused their savings strategy on buying a second home.

for dr Patel finds it challenging to save 50 percent of her salary despite not being a big purse.

“I’d have to give up vacations, and the things I like are lavish, like eating at better restaurants or flying to New Jersey to see my family in a jiffy,” she said, adding that she has $3,000 im month if not for their loan obligations.

claim vs. reality

Mark Smrecek, pensions advisor and head of financial wellbeing at Willis Towers Watson, the consulting firm, said most millennials he works with aren’t really able to save enough to be financially independent by age 50 – given their cost of living and of their lifestyle this is just not realistic to strive for. That year, the company’s Global Benefits Attitudes Survey showed that 36 percent of millennials were saving 5 percent or less of their income but wanted to save more across a variety of industries, 26 percent had taken out a loan from their 401(k), and 25 percent had taken out a loan from their 401(k). had withdrawn funds from their 401(k). Still, 52 percent said they expect to retire before age 65.

The TIAA’s 2022 Retirement Insights Survey found similar views: 31 percent of people ages 30 to 39 said they have an above-average level of confidence in their ability to plan for their retirement. Young millennials, 25-29 year olds, are the most confident: 40 percent said they have an above-average level of confidence in their ability to plan.

Despite that trust, Millennials aren’t saving enough, and many aren’t contributing enough to their 401(k) to maintain full compliance with the employer, Mr. Smrecek said.

Two of the challenges younger workers face when preparing for retirement are fewer employers offering pension plans, and companies are no longer guaranteed to match an employee’s 401(k) contribution. According to the Bureau of Labor Statistics, as of March 2020, 52 percent of private sector workers only had access to defined contribution plans such as 401(k)s. Only 12 percent had access to both a retirement plan and a defined contribution plan, while 3 percent only had access to a retirement plan.

Additionally, this lack of a pension or 401(k) match puts a strain on workers to save for their future, said Jake Northrup, a certified financial planner at Experience Your Wealth in Bristol, RI Retirement for employees who help themselves into retirement “, he said.

Don’t wait until 65

Ms. Minichiello and her husband began saving about 53 percent of their after-tax earnings in 2010 in hopes of leaving their current jobs when she hits her late 40s and he hits his early 50s. Ms. Minichiello, a co-founder and partner at BEspoke Medical Affairs Solutions, a healthcare consulting firm in Cambridge, Mass., wants to explore her interests in nonprofit organizations and executive coaching — an area that, she said, is just as rewarding as her current position.

“I don’t want to save, save, save and then retire at 65,” Ms. Minichiello said. She said she’s seen too many people put their lives on hold until they retire, only to then get sick or let their spouse die.

Saving half her net wages hasn’t been that difficult, Ms Minichiello said. “We never have the latest technology, we don’t buy new cars and we use everything until it doesn’t work anymore,” she said. Both she and her husband have a six-figure income.

For a decade, the couple invested most of their life savings in a brokerage account that earned compound interest and would not penalize them if they left before their 59.5. Age withdrawals as an IRA would do. The couple has paid off their student loans and they are exhausting their HSAs and 401(k)s every year.

Having a mix of traditional retirement accounts and more versatile savings accounts is key, Mr Northrup said.

“You don’t want to have all of your savings in pre-tax retirement accounts that were used before 59.5. years of life can be costly,” he said. Mr. Northrup sometimes advises his millennial clients to reduce their retirement savings to have more money available for more short-term goals like buying a home, taking a trip, or paying off debt.

Valerie A. Rivera, a board-certified financial planner and founder of FirstGen Wealth in Chicago, offers similar advice to her millennial clients. When one of her clients maxed out her 401(k) but was struggling to save for a home, Ms. Rivera advised her to put that money in a brokerage account to use on the property. “It feels different, more tangible and more desirable because they can access it,” she said.

When Ms. Minichiello and her husband decided to save money for a second home in mid-2020, the couple’s savings rate dropped to 40 to 50 percent. Instead of investing their money, they put it into a high-yielding savings account they called the Awesome Life Fund.

In 2021, they bought a home on Cape Cod that they plan to rent out when they’re not using it with their two young children. “I believe your financial approach needs to be aligned with your values,” Ms. Minichiello said. “I value freedom and flexibility above all else.”

Multiple sources of income

Few millennials, including Ms. Minichiello, believe they will have access to Social Security funds by age 62, and many are skeptical that traditional plans alone, such as a 401(k) or Roth IRA, will be adequate.

“I don’t know anyone who says, ‘Thank God I have my Roth IRA,'” said Joshua Frappier, 34, a Newburyport, Mass., real estate agent who sells properties in southern New Hampshire and the north coast of Massachusetts.

Mr. Lyman agrees that even paying the maximum amount into a 401(k) plan each year — this year’s limit is $20,500 — would not allow you to save enough money to be financially independent by age 50. You would need other assets, such as real estate, an investment account or a passive income-generating business, to create enough wealth, he said.

To retire at 50, Mr. Frappier focuses on creating multiple income streams alongside his full-time job as a real estate agent. Without passive income, he said, “you have no way of overcoming your financial limitations.”

Mr. Frappier owns two single family homes in Hampton Beach, New Hampshire. He lives in one and rents out the other, which he estimates generates at least $60,000 in annual income. He is in the process of buying a 10 unit property with several other real estate investors.

“I plan to buy as much property as I can as soon as possible while it’s cheaper than it will be next year or 10 years from now,” Mr Frappier said. As a Navy veteran, he is eligible for soft loans, but since he left the military 20 years ago, he is not eligible for a pension.

He believes real estate will give him a better return than the SEP IRA, which is for the self-employed and into which he contributes annually. He paid off his student loan years ago and recently opened a brokerage account.

Mr Frappier knows he is fortunate to have a financial plan. “Almost everyone I ever speak to doesn’t actually have a retirement plan,” he said, “and they’re caught up in the fight against their happiness and career.”