Millennials need to be real, not ideal, about their prospects for retirement, a senior wealth advisor at the Meridian Credit Union tells WP.
“I certainly don’t get that impression,” said Paul Shelestowsky. “They make a lot of assumptions about what’ll be like 40 years from now but they’re dealing with so many more challenges than boomers have to face and as an advisor, I find it extremely challenging get them thinking about real situations.
His comments come after BMO released a study citing millennials feel more optimistic than boomers about their prospects for retirement.
According to the study, almost half of millennials, 47 per cent, feel good about being able to afford their ideal lifestyle post-retirement while just a third of boomers feel good about their retirement prospects.
What’s more, millennials feel they need an average of $442,000 to afford retirement while boomers need just $385,000.
“Millennials reported they would need an average of $441,610 saved for retirement and currently have an average of $15,194 saved in their RRSPs,” as quoted in the BMO report.
“Boomers cited they would need an average of $385,184 saved for retirement and currently have an average of $65,394 saved in their RRSPs.”
Despite their impression and just the amount of time millennials (18 to 34) have to consider their retirement plans, optimism is great to have, said Shelestowsky, but they have to be realistic and learn from the lessons of boomers.
“About 20 per cent of my clients are millennials and what I can say is that we help to demystify their expectations because there can be a disconnect there,” he said.
What he explains is a reality many millennials face: the inability to keep a job; high debt demands on school loans and car payments; and exorbitant home prices that, in some places, compare nowhere to the amount of salary some make to pay it.
“It’s not like it was for boomers. House prices were $30,000 and salaries fell more in line with being able to pay off your mortgage by the time you were in your mid-40s. Today, it’s almost impossible,” Shelestowsky said.
“Chances are, if you were going to be a teacher or a nurse back then, you’d probably do that until you retired and pension plans were more intact. These days, none of that is guaranteed. It’s harder for millennials to find work, let alone keep a job for 10 years or more.”
Chris Buttigieg, senior manager of Wealth Planning Strategy at the BMO, echoed similar sentiments, preaching words of caution to millennials about unrealistic expectations.
“… They should definitely take heed of any lessons learned from their parents on what works and what doesn't with saving for retirement,” he said. “They should also make sure that they have a financial plan that will help keep them on track."
Advisors will find themselves dealing with the challenges, much like Shelestowsky, as the economy continues to fluctuate, affecting financial plans and goals for millennials.