Millennials want to retire at 50. How to pay for it is another question.

Although Devangi Patel, 33, has been working as a cardiothoracic anesthesiologist at a large medical center outside of Atlanta for only two years, her goal is to afford to leave her job at age 50.

“That, to me, is the American dream,” he said.

Dr. Patel is not alone in her quest to become financially independent, and at a relatively young age. It appears that a generational shift is underway: Many working millennials don’t aspire to retire in their mid-to-late 60s like their parents. Instead, many with professional careers are looking to leave their jobs at 50 and work for themselves or take on a lower-paying role that’s more aligned with their interests, studies show and financial advisors are finding.

“I want to get to a point where I no longer have to work for money and can work for pleasure,” said Dr. Patel.

But reaching that goal has been more difficult than Dr. Patel anticipated. While she contributes to a 401(k) and Roth individual retirement account, invests in stocks with a brokerage account, and maxes out her health savings account, she’s also paying off a $250,000 loan for medical school and paying for her wedding in december.

While many working millennials like Dr. Patel want financial independence in their 50s, it doesn’t come easily, said Christopher Lyman, a certified financial planner with Allied Financial Advisors in Newtown, Pennsylvania. , ‘I read these articles. I see people doing this. I want to do this too,’” Lyman said. While he never tries to dissuade clients, he injects some realism: Achieving that independence at 50 will likely require saving 50 to 60 percent of your salary.

Millennials, who were born between 1981 and 1996, began their professional lives during the Great Recession and are navigating a world in which traditional paths to wealth, such as home ownership, are out of reach for a larger percentage than most. a generation ago. .

Their attitudes are also being shaped, in part, by uncertainty: They are witnessing significant economic changes just as they struggle to settle down. And they want to enjoy a post-race lifestyle sooner rather than later.

“It requires saving as much as possible and spending as little as possible, and doing both as soon as possible,” Lyman said.

While some millennials on this path identify with the movement known as FIRE (financial independence, early retirement), others, like Brit Minichiello, have broader goals.

“With traditional FIRE, we wouldn’t spend money and save it forever,” said Ms. Minichiello, 36. Instead, she is aligning her savings with her desire to enjoy life before she turns 65, which is why she and her husband, Dave, 42, recently focused her savings strategy in buying a second home.

For Dr. Patel, it’s a challenge to save 50 percent of her salary even though she doesn’t spend much.

“I would have to give up vacations and things I like that are luxurious, like eating at better restaurants or flying to New Jersey to see my family in a heartbeat,” he said, adding that he could save $3,000 by month. if it weren’t for your loan obligations.

Mark Smrecek, retirement consultant and financial wellness leader at Willis Towers Watson, the consulting firm, said most of the millennials he works with can’t save enough for financial independence at 50 — it’s just not realistic given their age. cost of living and the lifestyle they have. aspire to. This year, the company’s Global Benefits Attitudes Survey showed that 36 percent of millennial workers across a wide range of industries were saving 5 percent or less of their income but wanted to save more, the 26 percent had taken a loan from their 401(k) and 25 percent had withdrawn funds from their 401(k). However, 52 percent said they expected to retire before age 65.

TIAA’s 2022 Retirement Information Survey revealed similar sentiments, with 31 percent of 30- to 39-year-olds indicating they have a higher-than-average level of confidence in their ability to plan for retirement. Young millennials, ages 25-29, are the most confident: 40 percent said they had a higher-than-average level of confidence in their ability to plan.

Despite this confidence, millennials aren’t saving enough and many aren’t contributing enough to their 401(k) to get the full employer matching contribution, Smrecek said.

Two of the challenges younger workers face as they prepare for retirement: Fewer employers offer pension plans, and employers are no longer guaranteed to match an employee’s 401(k) contribution. 52% of private sector workers only had access to defined contribution plans, such as 401(k), as of March 2020, according to the Bureau of Labor Statistics. Only 12 percent had access to both a pension plan and a defined contribution plan, while 3 percent had access to only a pension plan.

What’s more, this lack of a pension or 401(k) leaves employees saving for their future, said Jake Northrup, a certified financial planner with Experience Your Wealth in Bristol, Rhode Island. retire employees by helping themselves retire,” he said.

Ms. Minichiello and her husband began saving about 53 percent of their after-tax income in 2010, hoping to leave their current jobs when she reaches 40 and he reaches 50. Ms. Minichiello, co-founder and partner at BEspoke Medical Affairs Solutions, a healthcare consulting firm in Cambridge, Mass., wants to explore her interest in nonprofits and executive coaching, a field, she said, that doesn’t pay as much as her current position. .

“I don’t want to get caught up in saving, saving, saving and then retiring at 65,” Ms. Minichiello said. She said she had seen too many people put their lives on hold until they retired only to get sick or have their spouse die.

Saving half of her take-home pay hasn’t been that hard, Minichiello said. “We never have the newest technology, we don’t buy new cars and use everything until it doesn’t work anymore,” he said. Both she and her husband have six-figure incomes.

For a decade, the couple invested most of their savings in a brokerage account that earned compound interest and didn’t penalize them for withdrawals before age 59.5, like an IRA would. The couple has paid off their student loans and each maxes out their HSAs and 401(k)s each year.

Having a mix of traditional retirement accounts and more versatile savings accounts is crucial, Northrup said.

“You don’t want to have all your savings in pre-tax retirement accounts that can be expensive to use before age 59.5,” he said. Mr. Northrup will sometimes recommend that his millennial clients reduce their retirement savings in order to have more cash available for short-term goals like buying a home, taking a trip or paying down debt.

Valerie A. Rivera, a certified financial planner and founder of FirstGen Wealth in Chicago, offers her millennial clients similar advice. When one of her clients was maxing out her 401(k) but having difficulty saving for a house, Ms. Rivera advised her to put that money in a brokerage account to use for real estate. “It feels different, more tangible and desirable, because they can access it,” she said.

When Ms. Minichiello and her husband decided to save money for a second home in mid-2020, the couple’s savings rate dropped to a range of 40 to 50 percent. Instead of investing their money, they put it away in a high-yield savings account they called the Awesome Life Fund.

In 2021, they bought a house on Cape Cod, which they plan to rent when not in use with their two young children. “I think your financial approach needs to be aligned with your values,” Ms. Minichiello said. “I value freedom and flexibility more than anything else.”

Few millennials, including Ms. Minichiello, believe they will have access to Social Security funds when they turn 62, and many are skeptical that traditional plans alone, such as a 401(k) or Roth IRA, are adequate. .

“I don’t know anyone who says, ‘Thank God I have my Roth IRA,'” said Joshua Frappier, 34, a real estate agent in Newburyport, Massachusetts, who sells properties in southern New Hampshire and the north shore of New Hampshire. Massachusetts.

Mr. Lyman agrees that even contributing the maximum amount to a 401(k) plan each year (this year’s limit is $20,500) would not allow him to save enough money to be financially independent at age 50. He would need other assets, such as real estate, an investment account or a business that generates passive income to create enough wealth, he said.

In order to stop working at 50, Mr. Frappier focuses on creating multiple streams of income beyond his full-time job as a real estate agent. Without passive income, he said, “you have no way to get ahead of your financial limitations.”

Mr. Frappier owns two single-family properties in Hampton Beach, NH He lives in one and rents the other, which he estimates generates at least $60,000 a year in income. He is in the process of purchasing a 10-unit property with several other real estate investors.

“I plan to acquire as much real estate as I can as fast as I can while it’s cheaper than it will be next year or 10 years from now,” Mr. Frappier said. As a Navy veteran, he is eligible for low-interest loans, but because he left the Army before completing 20 years of service, he is not eligible for a pension.

He believes that real estate will give him better returns than the SEP-IRA, designed for self-employed workers, to which he contributes annually. He paid off his student loans years ago and recently opened a brokerage account.

Mr. Frappier knows that he is lucky to have a financial plan. “Almost everyone I talk to doesn’t really have a retirement plan,” he said, “and they’re caught up in the battle against their happiness and their careers.”

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