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What you need to know about this millennial retirement experiment

What you need to know about this millennial retirement experiment, with Money Bites
This millennial retirement experiment had us all checking our retirement fund balance.

Money Bite-Size Read:

  • Millennials are experiencing more financial stress.
  • In an Australian TV program, millennials were part of a retirement experiment.
  • Here’s how the experiment worked to test their retirement stress and what you can learn from it to ensure you retire in comfort.

The Money Bites Take:

A recent millennial retirement experiment highlighted the need for young people to make small changes now that will help them enjoy their retirement.

Millennials are experiencing more financial stress.

Many young people experienced financial stress due to the COVID-19 pandemic, which affected their employment and income sources. Nearly a quarter of millennials experience daily financial stress, which we mostly respond to by tightening our budgets or ignoring the problem.

When you’re not sure how you’ll pay your rent, squirrelling away money that you can’t use for another 30 to 40 years might not be a priority. That’s why many young people put off retirement planning until later.

So what was the millennial retirement experiment?

A group of millennials were involved in an experiment to see how likely they were to experience financial stress when they were retired. The full story was covered on the Australian TV show, The Project on 5 July 2021.

How did the experiment work?

The experiment worked by having millennials stand in a series of circles that led to a red line. They stepped forward if a question about their finances applied to them, stepping forward toward a red line. Those people closest to the red line were more likely to experience financial stress in retirement.

Since the story aired, the advisor running the experiment has been bombarded by questions from millennials who didn’t know what to do next. We believe that behaviour change is most effective through education, which is why we want to discuss what we can learn from this millennial retirement experiment.

 

Here’s what we can learn from the millennial retirement experiment:

 

1. Forgive yourself for not starting earlier

We look at this experiment and feel like we’ll never have enough money to retire on. Forgive yourself for not starting earlier and look at your current options, including retiring early by changing your lifestyle.

 

2. Don’t forget your partner

The millennial retirement experiment showed that couples will need more money than single people to retire on. We know that even before we retire, money adds stress to relationships. Make sure you talk to your partner about money and how you’ll plan to retire comfortably together.

 

3. Know how much you need to retire

Participants in the experiment had different visions for their retirement, including being retired by 40 or travelling in first-class. Know how much your retirement vision will cost. The current Australian retirement standard at the time of writing requires you to save a superannuation balance of $545,000 for singles or $640,000 for couples to retire comfortably, assuming you also receive an age pension.

 

4. Check in on how healthy your super is

It’s important to take time now to sort out your super. This includes knowing where your superannuation is and what fund will work best for you needs right now. Superannuation is not a perfect retirement system but you can also top up your super balance with co-contributions under ATO guidance. Taking action now will help you feel more confident that you can retire in comfort.

 

5. Look at buying your house

Young people today find it difficult to buy their home in an inflated housing market. In fact, 65% of us said home ownership may not be an option for young people today. Participants were scared by rising house prices, but the experiment still presumed that they would own a mortgage-free property. Look at how you can start putting together a house deposit and explore different approaches to buying a house to see how you can achieve this financial goal.

The choices that they all make now will be really impactful for when they reach the end of their working life.

That’s what the host of the millennial retirement experiment said about the participants in the millennial retirement experiment. So if you’re concerned about financial stress in retirement, look at what you can do now to contribute to your future self so that you retire into cashmere, not acrylic.

Written by Kate Crowhurst

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