They think differently about work, plan for the future differently, and 20-29 year olds are prepared differently for retirement years than previous generations. Assistance in preparing for retirement is becoming an increasingly important consideration for young adults in their job choices, and the retirement age is less and less seen as an objective concept. According to Aegon research, both employers and employees need to adapt to changed conditions.
At most, one in ten young adults can expect to spend 20 or more years in their careers with a single employer, while the proportion was even higher than 50 per cent for those over 60. About half of 20-29 year olds do not even want to spend more than 1-5 years in one place and a fragmented career also affects their retirement prospects, according to Aegon’s 15-nation Pension Survey. In the first months of 2020, already after the coronavirus outbreak, 16,000 respondents (14.4,000 workers and 1,600 retirees) were interviewed.
“Portable” pension schemes are needed
The new social contract: Rethinking life, work and retirement among young adults An important finding of the research study is that the problems of the 20-29 generation are further exacerbated by the pandemic, with one in six people being forced out of work, a major concern at a stage in their lives when key competencies are being developed and professional relationships are being developed. attitudes towards saving and financial planning are developing among young adults. Due to the challenges ahead, the “portability” of pension savings and the existence of real-time traceable schemes are becoming increasingly important.
The millennial generation is less and less seeing the retirement age as an objective concept, while often underestimating the time spent in retirement, and thus the savings required for this. While they would have to plan for a longer life in their finances than their predecessors, the main priority is livelihood, which is an obstacle to conscious planning, Aegon research found. One of their main goals in life is to create the financial security of the future, but it is not ranked further than career or the enjoyment of life. And only one-fifth say they are well on their way to achieving an adequate level of retirement income.
The fact that they prepare for retirement in a different way is also shown by their expectations: 36 per cent say that they will live primarily from state benefits as retirees – the same proportion is 45 per cent for the whole population – and take into account the role of own savings in planning, for its various forms. However, they see social security as the main source of their expected future retirement income (18 percent), but plan to rely heavily on their personal savings (17 percent) and private pensions (12 percent).
First the livelihood, then the savings
The image of a responsible but financially underdeveloped generation emerges from the Hungarian data. The two top priorities in life are the family (58 per cent) and – slightly behind – financial future planning (50 per cent), the enjoyment of life as a goal only follows. As far as finances are concerned, it is with great advantage here that basic expenses are covered in the first place (61 per cent), followed by the enjoyment of life (40 per cent) and then independent home ownership (35 per cent). Less than average, 16 percent, can give the correct answer to the three basic questions that assess financial literacy. They rely primarily on the state (40 percent) to finance their retirement years, but they also devote a similarly important role to their own savings and investments (38 percent). 58 percent of them do not rule out working in addition to retirement. Another research yielded similar results.
Based on the results of the research, Aegon has identified five steps that will lead young adults to the safety of their retirement years. The starting point is a willingness to save on a lasting basis, but it is equally important to have a written financing life plan, an emergency scenario to deal with unexpected situations, a move towards a healthy lifestyle and acceptance of lifelong learning. Roughly one-third of young adults can be considered regular savers, but there are several barriers to greater retirement savings in this area. One-third prefer to set it aside for short-term purposes, 24 percent do not earn enough, and one-fifth focus on repaying existing debts. Two-thirds realistically see the actual future value of their current retirement savings, but only less than half realistically see what will be enough of what they are now setting aside for retirement purposes.
Confidence in employers
Perhaps the most important lesson from Aegon’s research findings is the important role employers can play in preparing young adults for retirement. Three out of four workers see their employer as an institution with confidence and every fourth to fifth young adult said they would be effectively encouraged to take some measures by the employer, such as financial education on pension financing and planning, or personalized savings, in early retirement. consulting. 20-29 year olds prefer to choose a job that will help them prepare for retirement.
The study found that in the 20th century, pension systems functioned as a tripartite social contract between governments, employers, and individuals. However, systems that ignore the differences in life paths and life situations and offer the same service to everyone in terms of key parameters are now obsolete: a new social contract is needed. Involving a wide range of stakeholders, the Aegon Center for Longevity and Retirement, the Transamerica Center for Retirement Studies and the Instituto Longevidade Mongeral Aegon aimed to launch a dialogue leading to long-term sustainable and needs-based social solutions. between partners.
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