Young people are optimistic when it comes to their financial futures.
According to new research from Charles Schwab, which surveyed 2,000 young Americans aged 16 to 25, a resounding 76 percent think they’ll have a better financial future than their parents. And they expect to retire, on average, at age 60. That’s “seven years earlier than full Social Security benefit eligibility for their age bracket,” the report notes.
Carrie Schwab-Pomerantz, a financial adviser, board chair and president of the Charles Schwab Foundation, thinks that their optimism is “perhaps unrealistic,” she tells CNBC Make It.
The good news is, “a big percentage put saving for retirement as a high priority,” she says. “That’s progress.” But the numbers tell a different story: The report found that young adults have just $1,628 in savings on average and have already racked up $8,003 in debt.
Schwab-Pomerantz isn’t the only expert who worries young people may be too optimistic about the future. Personal finance maven Suze Orman says that “70 is the new retirement age — not a month or year before.”
She points out that Americans are living longer, so your retirement savings need to last longer. “You likely have plenty saved up to breeze through 15 years or so of retirement. But, people, if you stop working in your 60s, your retirement stash might need to support you for 30 years, not 15,” she writes on Money.
Plus, research from the Stanford Center on Longevity suggests that the typical American would benefit from a later retirement age anyway. After analyzing 292 different retirement income strategies, the research team identified the best way for most people to withdraw their money in retirement, which they call the “spend safely in retirement” strategy. A key component is delaying Social Security payments until age 70, which could mean working longer.
Everyone’s scenario is different, and people settle down at all different times in their lives. To help you figure out the right amount to fund your retirement, use a retirement calculator.
Most importantly, don’t put retirement on the back burner, even if it seems too far away to consider. Doing so may push your end date even further back.