With increasing strain on social security systems globally, and the economic effects of the pandemic becoming more profound, young adults (age 20 to 29) are setting out on an uncertain journey of work and money. Globally, 52 percent of young adult workers indicate the longest period of time they have worked and/or expect to work for a single employer is just one to five years. They need to adopt a more "do it yourself" approach to preparing for retirement in a world that is changing rapidly.

The research report, The New Social Contract: Young adults reinventing life, work and retirement, explores the different attitudes and challenges young adults have with retirement and how they will shape the future of retirement systems. 

Young adult retirement experts Njani Ruetsch says: "For some of us, the conventional idea of one day stopping work altogether is disappearing. We are on a different journey through life, with more career breaks, sabbaticals, time to travel and a combination of short- and long-term savings goals. Stand-alone pension products designed around the concept of a job-for-life are irrelevant because our lives are anything but linear."

Young adults juggle a variety of life priorities, with "enjoying life", "my career" and "planning for my financial future" on a shared #1 spot (53 percent). Considering their competing priorities, it is encouraging to see that almost a third (32 percent) of young adult workers are "habitual savers" who say they always make sure they are saving for retirement.

Unconventional route to retirement

Only 20 percent of young adults say they are on course to achieve their retirement income. Their retirement preparations are increasingly becoming a mix between conventional and unconventional means as is reflected in their expected sources of retirement income and how they are saving for retirement.

Ruetsch: "Emerging trends like FIRE (Financial Independence, Retire Early) and the rising number of blogs or podcasts focusing on investing and budgeting, offer a lot of easy to digest content on finance and investing. Even though we have so much information, we shouldn't have to fully fund our retirement on our own. We need help from employers and governments to make sure we have the same benefits that previous generations had, whether that's through smart private saving or understanding the advantages of employer-sponsored retirement plans."

This poses serious challenges as well as opportunities for policymakers, employers, and the retirement industry, as many young adults are not yet saving for retirement – and many are missing out on starting to save early or advantages of employer-sponsored retirement plans, such as tax incentives and the compounding effects on investment growth over time.

The New Social Contract: Young adults reinventing life, work and retirement is based on findings from the 9th annual global Aegon Retirement Readiness Survey, which spans 15 countries in the Americas, Europe, Asia, and Australia. The survey was conducted during January and February 2020 at the onset of the pandemic. It is a collaboration among Aegon Center for Longevity and Retirement (ACLR) and nonprofits Transamerica Center for Retirement Studies® (TCRS) and Instituto de Longevidade Mongeral Aegon.

This report builds on the previous editions of The New Social Contract series.