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The New Retirement: Not Retiring

Merrill Edge® Report Finds Younger Generations May Never Stop Working; Will the Traditional Idea of Retirement Soon Be Extinct?

Friday, December 2, 2016 9:00 am EST

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"If millennials and Gen-Xers want a traditional retirement, they need to take action in the short term and plan for the uncertainties of the long term, especially as we continue to see competing priorities, such as paying down debt and caring for aging parents and children, derail these good intentions."

Younger generations may never experience retirement as it’s defined today, according to the latest Merrill Edge® Report. The majority (83 percent) of millennials plan to work in retirement, whether for income, to keep busy or to pursue a passion, which is a complete inverse of the 83 percent of today’s retirees who are not currently working or never have during their golden years.

The survey of more than 1,000 mass affluent Americans1, conducted between September 24 and October 5, 2016, reveals an upheaval in how the largest generation in today’s workforce will plan and save for their later years. Exactly half of younger millennials, ages 18-24, believe they need to take on a side job to reach their retirement goals, compared to only 25 percent of all respondents.

Perhaps this mentality is why millennials (15 percent) are three times more likely than Gen-Xers and baby boomers (5 percent) to rank an employer’s retirement plan as the most important factor when taking a new job.

“In previous reports, we found younger generations were redefining what it means to retire. This report goes one step further and questions if the milestone as we know it today is nearing extinction,” said Aron Levine, head of Merrill Edge. “If millennials and Gen-Xers want a traditional retirement, they need to take action in the short term and plan for the uncertainties of the long term, especially as we continue to see competing priorities, such as paying down debt and caring for aging parents and children, derail these good intentions.”

Growing savings insecurities

The report found many millennials and Americans overall are unable to articulate their “magic number” — the amount of money they need to live their desired retirement — and those who can are underestimating the amount. When asked what their magic number for retirement is, 56 percent of respondents don’t anticipate needing more than $1 million, and 19 percent simply “don’t know.”

Furthermore, nearly the same number of respondents believe they need to win the lottery to reach their financial goals in retirement (17 percent).

When asked why they are saving, the majority of Americans cite affording daily life (57 percent), closely followed by taking care of family (45 percent). But this doesn’t mean all respondents are comfortable discussing these affairs with their closest relationships – only 36 percent are comfortable talking about current retirement savings with their family members.

Despite visible insecurities with discussing their own number, the mass affluent still believe they are better at saving than many of their friends (43 percent), co-workers (28 percent) and significant other (27 percent).

Reinventing investment ideals

The investment ideals of yesteryear are also likely to become defunct as younger generations are increasingly describing their investment approach as “hands on.” Millennials are leading the charge in relying on themselves for savings (70 percent, compared to 60 percent of all respondents), and citing they make their own rules to investments (32 percent, compared to 19 percent).

However, this sense of self-reliance seems to be increasing a need for further financial guidance and validation from professionals in these decisions. Millennials are most likely to plan to hire a financial advisor within the next five years (31 percent), and are the most open to receiving financial advice online (42 percent).

“Younger generations are taking a more active approach to saving for retirement. Many investors across all age groups are now merging the guidance they receive from a variety of sources, whether it’s online or in-person with an advisor,” said Levine. “This growing shift is a significant driver of our decision to develop an online investment advisory program that combines the best of both worlds to help customers feel more confident in their investment decisions.”

For more in-depth information about the financial behaviors and priorities of mass affluent Americans, read the entire Fall 2016 Merrill Edge Report here. A complementing infographic is available here.

1 Merrill Edge Survey Methodology
Braun Research, Inc. conducted a nationally representative telephone survey on behalf of Merrill Edge. The survey was conducted from September 24, 2016 through October 5, 2016, and consisted of 1,045 mass affluent respondents throughout the U.S., defined as individuals with investable assets (value of all cash, savings, mutual funds, CDs, IRAs, stock, bonds and all other types of investments excluding primary home and other real estate investments). Respondents in the study were defined as aged 18 to 34 (millennials) with investable assets between $50,000 and $250,000 or those aged 18 to 34 who have investable assets between $20,000 and $50,000 with an annual income of at least $50,000; or aged 35-plus with investable assets between $50,000 and $250,000. We conducted an oversampling of 300 mass affluents in the following markets: San Francisco; Los Angeles; Orange County, California; Dallas; New Jersey; South Florida; Chicago; Atlanta; and Phoenix. The margin of error is +/- 3.0 percent for the national sample and about +/- 5.7 percent for the oversample markets, all reported at a 95 percent confidence level.

Merrill Edge
Merrill Edge is a streamlined investment service that provides access to the investment insights of Merrill Lynch and the convenience of Bank of America banking. With Merrill Edge, clients can view their Merrill Edge investment and Bank of America bank accounts on one page online. They also have access to easy-to-use tools, actionable insights, one-on-one guidance and competitive pricing for online trades. If clients prefer to receive advice and guidance to pursue and track financial goals, Merrill Edge Roadmap®, available with a Merrill Edge Advisory Center™ account, allows them to work one-on-one with a Merrill Edge Financial Solutions Advisor to develop a personalized action plan and receive specific investment recommendations tailored to them and their personal goals.

Bank of America
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