The millennial plan for retirement: Getting help from their kids

How millennials are planning for retirement

Some millennials are looking ahead to their eventual retirement are taking a page from an earlier era — one before the U.S. created Social Security.

Fewer than half of millennials say the federal pension program will factor into their retirement planning, compared with 9 in 10 baby boomers, according to a new survey by Natixis Investment Managers. 

Instead, most of the respondents in that age range (typically defined as those born between 1981 and 1996) say they'll get through their golden years by tapping their retirement savings. And 1 in 5 millennials told Natixis they're banking on their kids helping them out financially. 

From the basement into the garage

That view of retirement may reflect the reality of retirement today, with Social Security's trust fund slated to be depleted in 2033, at which point retirees would get only 77 cents for every $1 in benefits, noted Dave Goodsell, executive director at the Natixis Center for Investor Insight. Given such concerns, millennials are banking on multiple streams of revenue and assistance for their old age, including support from children who may not yet be born.

"Twenty percent of the generation that started in their parents' basement think they will end up in their kid's garage," Goodsell told CBS MoneyWatch.

He noted that the view may also stem from the growing trend of multigenerational households in the U.S. That issue is driven by partly by economic changes, with multiple generations bunking together to save on expenses, as well as cultural expectations among some groups that families should live together. 

About half of all 18- to 29-year olds lived with a parent last year, although that includes a growing segment of older adults who are residing with their adult children, according to Pew Research Center. 

Even so, boomers have starkly different expectations about where their retirement income. Just 2% of boomers — those born between 1946 and 1964 — expect their kids to help them in their old age, Natixis found. Most are relying on Social Security, as well as their retirement funds and personal savings. 

Social insecurity

One of the biggest generational differences in retirement planning stems from views on Social Security, with millennials' skepticism stemming from a crescendo of concern about the health of the old-age fund. About 8 in 10 millennials believe that Social Security benefits will be "dramatically" reduced by the time they retire, compared with 4 in 10 boomers, Natixis found.

"We have heard for a number of years the threat that Social Security will 'go bankrupt,' and that weighs heavily in an individual's mind," Goodsell said. 

Baby boomers are retiring in force, pushing up the number of Social Security beneficiaries at a faster clip than the number of younger workers replacing them. But advocates for the program point out that it could be shored up without cutting benefits, such as by eliminating the income cap on the tax that funds Social Security payments. In the current year, any income over $160,200 is exempt from the Social Security tax. 

Social Security benefits fall short despite increase

To be sure, It's not only millennials who are worried about Social Security, with a recent Allianz Life survey finding that 3 in 4 adults say they're not banking on the program in making financial plans for their retirement. 

But such views may ultimately hurt Social Security rather than helping its viability. For instance, if younger voters assume the program is bound to collapse, they might be less likely to vote for policy makers who would take the steps to shore it up and ensure it remains intact for future generations. 

$186,000 per year 

Every generation appears far from reaching their retirement goals, according to the Natixis data. Although millennials think they need almost $900,000 in retirement income to step back from work, the generation's median account balance is just $32,000. To reach their larger savings goal, they'll have to save an average of $35,000 per year, Natixis calculated. 

That may seem daunting, but it's not impossible. For one, millennials with a retirement plan squirrel away more of their income than either boomers or Gen Xers do, contributing 16% annually compared with less than 10% per year for the older generations, Goodsell noted. noted. 

Many boomers also may not be able to sock away enough money to afford their retirements, at least not in the style they prefer. Boomers say they need $1.12 million for their golden years, but have a median retirement account balance of $120,000. To reach their goal, the typical boomer would have to save $186,000 annually, Natixis said.

"Boomers have been trying to adapt and saying I'll work past 67 1/2 — we'll work to 70 and get more time to work as much as we can," Goodsell said. "It's kind of scary."


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