NextGen wants to retire young

(Photo: Shutterstock)

Regardless of generation, many dream of retiring early and living on their investment income when people are young. But something is different with Millennials and Gen Zers – more and more of them are literally putting their money on their lips and actively taking the right action.

That says Merrill advisor Jordan Ubertini, CRPC, CPFA based in Scranton, Pennsylvania. Ubertini is a member of Merrill’s NextGen Council, a group of financial advisors and colleagues from Millennials and Generation Z whose younger clients are already preparing for retirement, many of whom are motivated by early retirement.

Jordan Ubertini, CRPC, CPFA

Your customers aren’t alone: ​​According to Pew Research, 67 percent of Gen Zers and 61 percent of Millennials plan before age 65.

Bank of America’s recent Workplace Benefits Report showed that retirement planning is the primary goal of all employees, but generations differ in the importance they attach to that goal. The priorities of the second and third generation vary widely. Gen Zers and Millennials rank fundamentals like good savings, budgeting and paying for everyday expenses higher than other respondents, while Baby Boomers focus on retirement planning as they have made progress on other life goals.

Ubertini shares how he advises younger clients who want to be financially independent – and how to prepare for any hiccups that could affect their savings goals.

Katie Kühner-Hebert: You shy away from the term old-age provision – why is that?

Jordan Ubertini: In my practice, instead of using the word retirement when talking about long-term savings, I prefer to use the term financial independence – essentially having enough source income to lead the life one wants to live – be it the business plan, social security, or private investment, or a combination of all of the above. This can mean different things to different clients, including traditional retirement with no work or changing jobs to fulfill lifelong passions.

When I sit down with clients I enjoy engaging with them and engaging with them not only in terms of the financial aspects of their short and long term goals, but also in terms of the most important life priorities such as family, health , Home, giving, working and traveling.

What factors play a role in designing a savings plan in order to gain financial independence at an earlier age?

We talk about structuring their plans to account for inflation, as well as their expected longevity and what to do now to plan for that. When customers are in their 20s or 30s, they have the advantage that time and time is a very valuable resource in terms of saving for one goal – primarily, ROI.

But to be most successful, customers also need to determine projected expenses, and this is difficult for younger people to do. You need to first look at your current budget and, if possible, how it may change over time to determine what additional cash flow you need to devote towards your savings goal.

That word, budget, is difficult for a lot of people, especially younger customers. Many financial institutions have budgeting software and other tools on their websites to help people figure out what they are spending on each month, which makes it easy for them to keep track of it. Once they know this, they can determine the amount of additional cash flow they will need for their savings goals without sacrificing their current lifestyle.

If they’re unable to save enough of their available cash flow, tracking their budget on a monthly basis can be helpful to see the spending categories and identify areas where they exceeded goals and why.

While these savings goals can fluctuate from year to year, with the help of your advisor, you can track progress over time to help you stay on track with your long- and short-term goals.

What about planning when life events can get in the way?

Since there can be detours on the way to financial independence, I also like to talk to my clients about planning for possible hiccups that could affect their portfolios. Customers in their twenties, especially, often think that their lives will follow a straight line. This can happen in some cases, but in other cases life does happen – unexpected events that affect family and career. Just look at the last year of the pandemic – events can definitely change plans and people will have to adapt or rethink how they are going to achieve their goals.

I also advise clients on the importance of having an emergency fund – cash reserves equal to three, six, or even 12 months of living expenses – really an amount they’ll be most comfortable with. When you’re a young person it’s easy not to think about the possibility of a health event or job loss that can affect income – they often consider themselves invincible and that’s not a possibility, but it is and this is how we talk about the caution when opening a bank savings account.

What other advice do you give to Gen Zers and Millennials to help them achieve financial independence?

Another big topic I talk to younger customers about is debt, certainly from credit cards, but also from student debt. This is a big talking point and one that younger customers are very concerned about – some student loan payments can be the size of a mortgage, and that’s a daunting task.

Consultants can really help younger clients achieve their financial goals by tailoring plans to their specific goals and following plans annually to identify life detours early so they can adjust their plans.

Comments are closed.