Why financial plan for millennials has to be different?
Millennials need different financial plan, because they belong to a new generation who seems to switch jobs much more frequently than earlier generations that often stayed with their employer for very long periods and sometimes even stayed with that employer for their entire working life.
Millennials have been described as the generation born somewhere between 1978 and 1998 although the definition differs some depending on whom you talk to.
Understanding how millennials like to switch jobs more often than prior generations and understanding the fact that millennials most likely need their money to last longer in retirement due to longer life expectancy there are some key financial planning areas that have to be dealt with in a new way.
Group products such as group life and group disability income are very often products that go away as you leave your employer and without knowing what the next employer may provide, planning in these areas are very important.
The first step would be to get a clear understanding of what your employer truly provides and gain insight into the benefits and to see if there are gaps in the benefits and to see if the products can be taken with you.
Many employers in the past provided pension plans as well as a 401(k) or 403(b) retirement plan.
The pension would pay income for life in retirement and the 401(k) or 403(b) would be a supplement to help the employee put away extra money. Today most places have taken the pension plan away and therefore the 401K) retirement plan is the only way to save for retirement.
That puts pressure on the rate of return on the plan and it creates a need for the individual to save a lot more by themselves.
Life expectancy is longer today and individuals who retire in the future can expect to be in their retirement phase of life for a very long time which is great but it also puts additional pressure on savings and income strategies in retirement.
Without a pension and with a potentially long retirement duration there is a great need for a new way of looking at income in retirement.
Looking only at building up as much wealth as possible in no longer enough.
There has to be a true income plan that pays income for as long as retirement lasts and the income plan has to have built in “pay raises” so that retirement income keeps pace with inflation.
Work life balance
Millennials have a greater desire than older generations to create a more balanced life between their work, family, and recreational activities.
This means that making more money is not the main factor when choosing their employer. Other benefits such as work environment, vacation time and other benefits weigh in more than ever.
This creates an even greater need for the millennial to understand how to build up their personal financial plan so that they can create a life where they financially allow themselves to take time off, travel but also make sure that their savings are strong so that the same lifestyle can continue into retirement .
Written by CreativeNurse Team
2016-23273 Exp. 5/18