Millennials Redefine Retirement as ‘Financial Independence’

Millennials are “redefining” what retirement means, according to a new survey conducted by IRALogix Inc., a retirement industry fintech provider, as more than half believe retirement is defined not by age 65 but by “financial independence.”

While some Millennials said ceasing all work by age 65 is a goal they are highly focused on working toward, many said they view retirement not necessarily as complete exit from the workforce, but rather a “time of greater flexibility in their lives.”

When asked if they see themselves retiring at some point, 47% of Millennial respondents said they will retire as soon as they can afford it, and 22% said they will keep working, either because they “enjoy it or [because they] don’t have sufficient retirement savings.”

IRALogix conducted a February survey of Millennials, aged 28 to 43, with a wide range of household incomes.

Overall, IRALogix found that Millennials were moderately confident they will accumulate sufficient savings to retire at some point, but 29% said they have no confidence in their ability to save enough to retire.

The majority of Millennials held themselves accountable for ensuring they have sufficient retirement savings, while 25% said their employer is responsible and, 20% believe the government should provide their retirement savings.

Of those who answered “employer” as the party that should be held accountable for their retirement savings, almost one-quarter of respondents said they wanted a traditional defined benefit plan with investments selected by investment professionals, in which the employer assumes all the risk and is required to pay the employee a fixed monthly sum in retirement.

Money Dysmorphia

A recent report by personal finance company Credit Karma LLC also found that many Millennials and younger workers in Generation Z are experiencing “money dysmorphia”—defined as having a distorted view of one’s finances that could lead to making poor decisions. According to Credit Karma, this problem is more pronounced among younger generations, with 43% of Gen Z and Millennials saying they experience money dysmorphia. The Credit Karma study was fielded between December 18 and December 26, 2023.

Of those who experience money dysmorphia, nearly half (48%) of Gen Z and 59% of Millennials said they feel behind financially, likely contributing to feelings of financial inadequacy. However, 37% of respondents who report experiencing money dysmorphia reported having more than $10,000 in savings, with 23% of those having more than $30,000 in savings. According to Credit Karma, those amounts are well above the median amount of savings for Americans, which hovers around $5,300.

Respondents to the Credit Karma survey said money dysmorphia negatively impacts their finances, and of those, 40% said dysmorphia has held them back from building savings or led them to overspend and take on more debt.

However, IRALogix’s survey showed that Millennials appear to be able to contain their consumer debt reasonably well, despite these feelings of financial inadequacy. For example, 55% said they have between $0 and $20,000 in debt, excluding their mortgages; 18% have up to $35,000 in debt; and 11% said their debt exceeds $65,000.

When it comes to balancing short-term financial goals—like vacations, buying a home and paying down student loans and other debt—with saving for retirement, 62% of Millennials indicated they try to “strike an even balance between the two.” The survey revealed that 61% of Millennials are making regular contributions to an employer-sponsored plan like a 401(k), 403(b), SIMPLE IRA or a SEP IRA.

‘Playing Defense’

Northwestern Mutual’s 2024 Planning and Progress Study, conducted between January 3 and January 17, found that 42% of U.S. adults feel 2024, given current market and economic conditions, is a year to prioritize “playing defense” with their savings and investments.

Gen Zers and Millennials were the most likely to say they would add a side hustle to build more savings, whereas a high numbers of high-net-worth individuals—people with more than $1 million in investable assets—reported moving into safe, high-yielding instruments like money market funds.

At the same time, Gen Z respondents were the most likely of all generations to say they will increase non-essential spending, whereas Gen X respondents were the most likely to say they will be tightening their belts.

According to Northwestern Mutual, the main drivers of financial stress for respondents in 2024 was inflation, followed by “government dysfunction,” the U.S. presidential election and a potential recession.