Millennials don't plan on retiring at 65 — here's their new strategy

Millennial woman looking in the distance with a pen in her hand
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For decades, the road to retirement has been laid out for employees in a relatively straight path: Save up and leave the workforce at 65. But millennials are ready to take a detour

More than half of millennials believe retirement means financial independence, not reaching a set age, according to a new survey by Iralogix, an IRA-solutions provider. Additionally, nearly 17% say they don't anticipate leaving the workforce fully; rather, they envision having more flexibility in their careers, whether that's working part-time, starting a business or pursuing a passion project. 

"Millennials have gone through two pretty bad down markets, and they have a different experience than other generations," says Lowell Smith, cofounder of Iralogix. "For millennials, it's more of a lifestyle, which doesn't seem to fit the way baby boomers and the older generations are planning it out." 

Read more: How 4 different generations approach retirement — and where they're failing

Watching their parents go through the 2008 recession, or seeing their early careers stall at this time left an impression on millennials, Smith says. More recent financial downturns have caused many in this demographic to rethink their financial well-being altogether. Millennials are saving more than other generations, but the end goal of a traditional retirement doesn't seem as appealing — or plausible — to them. 

The survey found that 29% of millennials do not feel confident they'll have enough saved for retirement, and just 9% are exclusively putting their savings toward retirement. Instead, millennials are working on striking a balance between their short and long-term financial needs, as 62% say this is their main goal. 

"Millennials are very good savers as a whole, and better than most of the other generations have been," Smith says. "But this is a challenge for the retirement industry, because how do you do the financial planning if you don't have a real end date?" 

Read more: Millennials are on track for better retirement than boomers, Vanguard study finds

Smith says retirement plan sponsors and employers should focus more broadly on financial education and the basics of savings and investing so that all employees feel confident in their ability to accumulate funds over time. This is an area that has been lacking for most employees, but the right support could help them feel more confident in their future goals. 

"Financial wellness is about educating our workforce on finances, and we haven't done that well," Smith says. "More education on investing and planning would be helpful for employers to deal with folks who think about things a little differently." 

Relying on tech tools to provide this education can be beneficial, yet Iralogix found millennials haven't typically responded to those methods. Less than a third of millennials have utilized a robo adviser for retirement planning. Smith advises employers and plan sponsors to audit their tools to ensure they're actually effective for users. 

"Think of a robo adviser as an advice engine within a 401(k) plan, but we make it complicated — those pieces of advice require you to sit down and research your finances," Smith says. "What we need to do is give you the advice as quickly as possible and make it meaningful and educational. People want to learn, but they want to know why you're telling them what to do." 

Read more: Why early retirement is bad for the brain, and for business

Smith says employers should embrace and learn from the millennial mindset around retirement, as it's an opportunity to stay in the workforce longer and continue contributing in a productive manner. Being more accommodating with work schedules to retain talent longer is a prudent step, especially as other employers push for less flexibility with return-to-office mandates. 

"We're seeing a lot of organizations forcing folks to go back to work, and I'm not sure that's the right thing to do with the millennial generation," Smith says. "They want a balance of work and home and that's going to be here to stay, and they're looking for ways to stay productive as they get older."

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