Should Millennials Be Planning for Retirement Beyond Age 65?

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Should Millennials Be Planning for Retirement Beyond the Age of 65? – Ad | This is a paid partnership with PensionBee but all words and ideas are mine.

Have you ever wondered what the current cost of living crisis and the season of high inflation means for your future retirement?

Although the future might seem very far away, paying close attention to the trends of today might offer us an insight into what the future might hold.

I’m of the millennial generation, and a big concern that I have is the increasing reality that most people from my generation will likely never have the option to retire if they carry on as they are.

When I think of the generation after me, Gen Z, I feel even less reassured.

When you break down pension stats by gender, there is a striking gap between men and women, driven by various forms of inequalities over time.

All roads point to a more challenging future ahead financially, which makes me wonder – is the traditional idea of retirement as we know it over?

Planning For Retirement: Things are changing

The idea of retirement has been changing for years, with research showing that older people were working for longer.

Here in the UK, the employment rates of people over the age of 65 doubled between the years 1998 and 2018:

But then came the pandemic and the way we work began to experience a real shift in how we think of retirement.

For the first time in years, more people experienced freedoms like never before due to the need to work from home.

More people got more of their lives back and had more time for non-work activities. 

Coupled with the challenges of Covid-19, more people than usual decided to take an earlier retirement.

The FT reported an exodus of older people from the UK workforce with over 250,000 more 50 to 64-year-olds leaving the workforce since the start of the pandemic.

The Office for National Statistics (ONS) published the  Over 50s Lifestyle Study in March 2022 for the period since the pandemic started in March 2020.

This showed that those who are aged between 50 and 59 were leaving work sooner than those aged 60 to 70:

Most people who left (47%), left to retire from paid work:

But this trend has taken a notable shift due to the rising cost of living driven by high inflation.

Those who retired earlier with certain assumptions made about their investments have seen those investments fall by at least 20% as inflation exceeded double digits.

In February 2022, the ONS gathered stats from those who retired over covid, asking if they’d consider returning back to work.

Below were their reasons for considering a return back to work:

The ONS stated that:

“Around two-fifths (39%) of those who left work or lost their job during the coronavirus (COVID-19) pandemic would consider returning to paid work in the future, with those in their 50s almost twice as likely to consider this (58%) than those aged 60 years and over (31%).”

Recommended: Why You Should Aim To Retire Early But Not Stop Working

Notice the high percentage of people who wanted to return “for the money”.

Recruitment companies have reported a sharp spike in those aged 55 to 64 ‘urgently seeking work’ due to financial pressures.

It was also recently reported that those starting retirement in 2022 ‘plan to continue working’ due to insufficient savings as the cost of living rises.

If life is so challenging for those over 50, what does that mean for Millennials and Gen Zs for the future?

UK Average Retirement Savings By Age

Further stats by PensionBee on the UK Pension Landscape in March 2021 after surveying 65,656 customers, showed that:

• The average UK pension pot was only £21,164.
• And the average for men and women are £24,236 and £15,006 respectively.

This becomes even more revealing when looked at by age group:

• Under 30s males and females have £3,925 and £3,215 respectively on average with an expected £140,700 pension pot size at 65.
• 30 – 39 year old males and females have £12,075 and £9,537 respectively on average with an expected £135,900 pension pot size at 65.
• 40 – 49 year old males and females have £33,598 and £22,598 respectively on average with an expected £112,900 pension pot size at 65.
• Over 50 year old males and females have £52,592 and £28,249 respectively on average with an expected £87,500 pension pot size at 65. Note the high 46% gender pension gap of this age group.

The stats above indicate that we’re still not saving enough for retirement. 

In addition, in a world of higher inflation, we’d need to save even more to compensate for the decline in real performance of our money over time. 

This can all seem like a lot to process given the competing needs for money today and in the future.

Most millennials are likely never going to retire in the traditional sense of not working at all one day.

All roads point to more people working past the traditional age of 65.

Living a partially retired lifestyle is the most likely outcome given the trend towards more flexibility and greater location independence for this generation.

More and more millennials do not want to defer gratification. 

They want to travel now, have fun now and do meaningful work, which might not always pay as well.

As such, we’re likely to see a future of more portfolio work for millennials and Gen Zs, which would also point to a future of retirement where various part-time jobs will become the norm.

With the new world we find ourselves in post-covid, we’re also likely to see this trend extend to more of the Gen Xs.

The Department for Work and Pensions (DWP) stated that the average UK worker will have 11 jobs during their career.

Those 11 jobs will also come with different pensions, which need careful management to prepare for a good retirement.

From our personal experience of planning for retirement, PensionBee offers a simple way to begin taking control of all your old work pensions.

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Conclusion

There is a growing need for us all to think carefully about what type of retirement we all want.

Would you like a traditional retirement? Or a partial one where you’ll carry on working or even running a side hustle?

Either option points to intentionally increasing your savings rate and planning for that future, which for all of us will become a reality sooner than we expect.

Doing this will create greater Financial Independence for you in the years to come and the option of a retirement that you want rather than one you end up in out of circumstance.

Is planning for retirement something you've been putting off? What type of retirement do you realistically think you’ll have? Let me know in the comments below 😀

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