3 in 4 Millennials Say They Can't Retire Without This One Thing
While the oldest millennials are still about two decades away from retirement, many are already thinking seriously about how they'll fund life after work.
According to a new TIAA Institute report, most believe one key ingredient is essential: 73% of millennials say they won't retire unless they have a source of guaranteed lifetime income. Yet while most millennials recognize the importance of guaranteed income, many aren't sure how to secure it.
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Here's where the gaps are — and what they could mean for this generation's retirement plans.
Many Millennials Want Guaranteed Income but Don't Know How To Get It
According to the report, 73% of millennials agree they won't retire without guaranteed lifetime income (26% "strongly agree") and 70% are confident they'll be able to secure it (21% strongly agree). However, only 64% say they actually understand how to secure it (19% strongly agree).
"The gap likely reflects a combination of financial literacy challenges and the complexity of today's retirement landscape," said Tim Pitney, head of lifetime income distribution at TIAA. "Unlike prior generations who could rely on employer pensions as a straightforward path to guaranteed income, millennials must largely construct that security themselves through products like annuities, which many may have limited exposure to or depth of knowledge about."
Additionally, the sheer number of retirement savings options available can create decision paralysis, making it harder to translate awareness of a need into actionable knowledge, Pitney added.
Many Millennials Don't Expect Social Security To Cover Retirement
Social Security has long been viewed as a source of guaranteed retirement income, but millennials are not counting on it as their primary financial lifeline. According to the report, the generation ranks Social Security second — not first — among its expected retirement income sources.
"Social Security's long-term funding challenges are well-documented, and current projections suggest the trust fund could face depletion in the coming decade," Pitney said. "But even setting those concerns aside, Social Security was always meant to be a supplement to a broader retirement strategy — an income floor, not a complete replacement."
Social Security, on average, replaces about 40% of pre-retirement income for median earners.
"It’s one leg of the 'three-legged stool of retirement,' including Social Security, personal savings — like a 401(k) or IRA — and pensions," Pitney said.
He believes that millennials ranking it second reflects both a realistic read of the program's current pressures and a fundamentally sound understanding of how retirement income should be structured.
"Diversifying away from dependence on Social Security as a primary source positions them for greater resilience in retirement," Pitney said.
Retirement Uncertainty Is Pushing Millennials To Work Longer
Millennials expect to retire at age 60 on average — three years later than today's retirees. Uncertainty about future retirement income may be helping drive that decision.
"When people lack confidence in having a reliable income stream in retirement, extending their working years is a natural risk-management response," Pitney said. "Working longer means more time to save and a shorter drawdown period."
That expectation may reflect a generation trying to solve a more complex retirement challenge than many previous workers faced, particularly as traditional pensions have become less common.
"Employers, policymakers, educators and the retirement industry at large have a duty to help all workers navigate and solve this puzzle by enabling greater access to retirement solutions and building confidence among a generation with the most to gain from getting retirement right," Pitney said.
Financial Advisors Can Help Millennials Build Retirement Income
Despite widespread concern about retirement income, only 17% of millennials currently work with a financial advisor, according to the report.
"A financial advisor can help millennials with the building blocks of financial security," Pitney said, "from establishing an emergency fund to providing guidance on how to best save in an employer-sponsored plan, and offering a personalized savings road map, which can drive accountability and meaningfully improve confidence in retirement outcomes."
A financial advisor can also help bridge the gap between awareness and action, showing workers how guaranteed lifetime income may fit into a broader retirement strategy.
"Given 64% say they understand how to secure guaranteed income but only 1 in 5 feel strongly confident they’ll be able to secure that source," Pitney said, "many may be operating on incomplete or self-directed knowledge."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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