Devangi Patel, 33, has only been working as a cardiothoracic anesthesiologist at a large medical center outside Atlanta for two years, but her goal is to be able to afford to quit her job at 50. .
“It’s the American Dream for me,” she said.
Dr. Patel isn’t the only one striving to become financially independent. It seems that the generational shift is progressing smoothly. Many millennial workers don’t want to retire in his mid or late 60s like their parents did. Instead, studies show that many people with professional careers are either quitting their jobs and working for themselves by age 50, or seeking lower-wage jobs that better suit their interests. A financial adviser explains.
“I want to be able to work for fun and not have to work for money,” Dr. Patel said.
Achieving that goal, however, proved more difficult than Dr. Patel expected. She’s donated to her 401(k) and Roth personal retirement account, invested in stocks in her brokerage account, and depleted her health savings account, but medical school she paid off her $250,000 loan and I am also paying for my wedding in December.
Many millennial workers like Dr. Patel hope to be financially independent in their 50s, but that’s not going to be easy, says Allied Financial Advisors, a certified financial advisor in Newtown, Pennsylvania. Planner Christopher Lyman said. , “I read these articles. I see people doing this. I want to do this too,” Lyman said. He never tries to dissuade clients, but injects some realism—to achieve that independence by 50, he probably saves 60 percent of their salary from his 50 you will need.
Millennials, born between 1981 and 1996, began their professional lives during the Great Recession, and many more than a generation ago have opted for traditional paths to wealth, such as owning a home. We are moving into a world out of reach. .
Their attitude is partly shaped by uncertainty. They are witnessing major economic changes just as they strive to establish themselves. And they want to enjoy a post-career lifestyle sooner or later.
“We need to save as much as possible, spend as little as possible, and do both as quickly as possible,” Lyman said.
While some millennials on this path sympathize with the movement known as FIRE (Financial Independence, Early Retirement), others, like Brit Minichiello, have broader goals. .
“With traditional FIRE, we weren’t spending money and it was gone forever,” said 36-year-old Minichiello. Instead, she’s matching her savings to her desire to enjoy her life before she turns 65. So she and her husband Dave, 42, recently focused their savings strategy on buying a second home.
Dr. Patel isn’t spending a lot of money, but saving 50% of his salary is difficult.
“You’ll have to give up vacations, like eating at fancy restaurants and flying to New Jersey to visit family,” she said, adding that she could save $3,000 a month. If she does not have her loan obligations.
aspirations and reality
Mark Smrechek, a retirement consultant and financial wellbeing leader at consulting firm Willis Towers Watson, says most of the millennials he works with are actually 50 years old. He said he didn’t have enough savings to be financially independent. aspire to This year, the company’s Global Benefits Survey found that 36% of millennial workers across industries are saving 5% or less of their income but would like to save more, and 26% are on a 401(k) to 25% withdrew funds from their 401(k). Still, 52% say he expects to retire by age 65.
The 2022 Retirement Insights Survey by TIAA revealed a similar view, showing that 31% of people between the ages of 30 and 39 are above average confident in their ability to plan for retirement. increase. Young millennials aged 25 to her 29 are the most confident, with 40% saying they are above average confident in their planning abilities.
Despite this confidence, millennials aren’t saving enough and many don’t contribute enough to their 401(k)s, so they aren’t fully aligned with their employers, Smrecek said. says.
Two of the challenges young workers face as they prepare for retirement are the declining number of employers offering pension plans and the guarantee that employers will match employees’ 401(k) contributions. is no longer there. According to his 52% of private sector workers, in March 2020 he only had access to defined contribution plans like 401(k)s. Bureau of Labor StatisticsOnly 12% have access to both a pension plan and a defined contribution plan, and 3% have access to only a pension plan.
Additionally, this lack of a pension or 401(k) match places a burden on employees to save for the future, said Jake Northrup, a certified financial planner at Experience Your Wealth in Bristol, RI. I’m here. I’m leaving to help my employees retire,” he said.
I can’t wait until I’m 65
Miniciello and her husband began saving about 53% of their after-tax income in 2010, hoping to quit their current jobs when she was in her late 40s and he was in his early 50s. . Co-founder and partner of BEspoke Medical Affairs Solutions, her healthcare consulting firm in Cambridge, Massachusetts, Minichiello wants to explore her coaching interests for nonprofits and executives. as much as she is in her current position.
“I don’t want to get hung up on saving, saving, saving, and retiring at 65,” said Minichiello. She said she has seen too many people get sick or lose their spouses, putting her life on hold until her retirement.
According to Minichiello, saving half of his take home was not that difficult. “We don’t get the latest technology. We don’t buy new cars. We use everything until it stops working,” she said. Both she and her husband earn six figures.
For 10 years, the couple invested most of their savings in a compounding brokerage account that didn’t penalize them for withdrawing before the age of 59.5 like an IRA did. The couple paid off their student loans and are paying off their HSA and 401(k) each year.
Northrup said it’s important to combine traditional retirement accounts with more versatile savings accounts.
“You don’t want to put all your savings in a pre-tax retirement account that’s expensive to spend before you’re 59.5,” he said. Northrup sometimes advises millennial clients to save less for retirement and have more cash for short-term goals like buying a home, traveling or paying off debt.
Valerie A. Rivera, a certified financial planner and founder of FirstGen Wealth in Chicago, offers similar advice to her millennial clients. When one of her clients ran out of her 401(k) but was struggling with savings to build her house, Rivera asked a brokerage firm to use the money for real estate. I advise you to deposit it in your bank account. “It feels different, more specific and desirable because they have access to it,” she said.
When Miniciello and her husband decided to save money for their second home in mid-2020, the couple’s savings rate dropped to the 40-50% range. Instead of investing their money, they put it into a high-yield savings account called the Awesome Life Fund.
In 2021, they purchased a home on Cape Cod. We plan to rent it when not in use with our 2 young children. “I believe your financial approach needs to align with your values,” said Minichiello. “I value freedom and flexibility above all else.”
multiple income streams
Few millennials, including Minichiello, believe they will have access to Social Security funds when they turn 62, and many rely on traditional plans such as 401(k)s and Roth IRAs alone. I doubt it is enough.
Joshua Frappier, 34, a real estate agent in Newburyport, Massachusetts, who sells properties in southern New Hampshire and the north coast of Massachusetts, said:
Lyman also agrees that even if he contributes the maximum amount to a 401(k) plan each year (the cap is $20,500 this year), he won’t be able to save enough money to become financially independent at age 50. . You will need other assets such as: Be it real estate, investment accounts or passive income generating businesses to generate enough wealth, he said.
To stop working at 50, Frappier is focusing on generating several streams of income beyond his full-time job as a real estate agent. Without passive income, he said, “there is no means of overcoming the economic limit.”
Mr. Flapia owns two single-family properties in New Hampton Beach. He lives in one of his houses and he already rents out one. He estimates that he generates at least $60,000 in revenue annually. He is about to purchase his 10-unit property along with several other real estate investors.
“We’re going to get as much property as quickly as possible, cheaper than next year or 10 years from now,” Mr. Flapia said. As a Marine Corps veteran, he is eligible for low-interest loans, but he is ineligible for a pension because he discharged before completing 20 years of service.
He believes the property will yield higher returns than the SEP-IRA designed for the self-employed, to which he contributes annually. He paid off his student loans years ago and recently opened a brokerage account.
Frappier knows he’s lucky to have financial planning. “Most people I’ve ever spoken to don’t really have a retirement plan,” he said.