COVID-19 has impacted Americans in many different ways. And while some workers say that the pandemic has caused them to delay retirement, a study from Northwestern Mutual shows that younger people want to retire earlier. If you are planning to retire early, a financial advisor could help you create a financial plan to reach your goals.
Millennials and Gen-Z Plan to Retire Earlier
Perhaps the most interesting tidbit found in the study is that, overall, the two youngest generations currently in the workforce are planning on retiring before they reach age 60 – Gen Z at 59.4 on average and millennials at 59.5. The overall average expected retirement age is 63.6, which is up from 63.4 last year.
There are a number of reasons why people are planning on retiring earlier. Some of them that apply to younger workers include:
- Wanting to spend more time with loved ones (42%)
- Focusing on hobbies/priorities outside of work (33%)
- Realizing their personal mission is more important than saving more (29%)
Making this dream a reality, though, will take more than just will — it will take a lot of work by these young workers to put themselves in the right financial position.
“Planning is not a one-and-done exercise,” said Christian Mitchell, executive vice president & chief customer officer at Northwestern Mutual, in a statement. “It requires ongoing upkeep and the flexibility to respond to shifting circumstances. With so many people revisiting their financial timelines this year, active planning should be a priority. That requires attention, engagement and a willingness to take action, and having the support of a trusted advisor is critical in that process.”
Why Some Are Pushing Back Retirement
While younger Americans are tending towards an earlier retirement, plenty of people are seeing themselves generally delaying retirement between three and five years because of the pandemic. Around a third of those delaying retirement say their timeline has been shifted by at least a decade.
The most common reasons for delaying one’s retirement timeline include wanting to work and saving additional money. Newfound flexibility at work, concerns about rising healthcare costs, the need to dip into retirement savings early and the need to take care of relatives or friends influenced those decisions to continue working.
“The economic environment created by the COVID-19 pandemic has caused a lot of people to re-examine their financial lives,” said Mitchell. “For some, the prospect of an early retirement appears more achievable, while others are adjusting for delays. In either case, having a holistic plan is critical to navigating the uncertainty and reaching your goals.”
How to Achieve an Early Retirement
If retiring early is part of your life plan, there are a few steps you should take to make that a reality. The first and most obvious is to take advantage of any workplace retirement plan your job offers, such as a 401(k). Save as much as you can afford each pay period, making sure you’re getting any employer match that is available to you, as this is free money that you get to invest tax free.
Another important point is to make and stick to a budget. A good portion of smart financial planning is spending smartly, and thinking about it in advance is the best way to make sure your spending habits don’t get you into trouble in the long run.
Pay attention to your asset allocation within your investments. When you’re younger, you can take more risks and build a portfolio mostly around stocks and other equity investments. As you get older, you’ll want to shift more toward bonds, annuities and other safer investments that will protect your assets rather than leave you possibly holding the bag right before you’re planning on retiring.
Finally, consider getting professional help from a financial advisor who could help you put a plan together for your goals and needs.
Bottom Line
The COVID-19 pandemic has impacted American life in many ways. One change is shifting the way many people are planning for retirement. Younger people want to retire earlier, while others are preparing to work at least 10 years longer than they had originally planned.
Retirement Planning Tips
- A financial advisor can help you set a retirement roadmap tailored to your preferences. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you don’t have access to a workplace retirement plan, you can start an IRA. This allows you to save money for retirement without any involvement of your job.
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