The New Social Contract: Young adults reinventing life, work, and retirement

The New Social Contract: Young adults reinventing life, work, and retirement

5 minute read

New research explores how young adults (aged 20-29) are on an uncertain journey of work and money, and how they need to adopt a more “do it yourself” approach to preparing for retirement in a rapidly changing world.

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.

The report is based on findings from the 9th annual global Aegon Retirement Readiness Survey, which spans 15 countries in the Americas, Europe, Asia, and Australia. This is a collaboration among Aegon Center for Longevity and Retirement and nonprofits Transamerica Center for Retirement Studies and Instituto Longevidade Mongeral Aegon. The survey was conducted during January and February 2020 at the onset of the pandemic.

 Key findings of the report

> 52 percent of young adults indicate the longest period of time they expect to work for a single employer is 1-5 years

> Life priorities "enjoying life", "my career" and "planning for my financial future" are on young adults' shared #1 spot (53 percent)

> Only 20 percent of young adults say they are on course to achieve their retirement income

> Young adults expect to be as reliant on their own savings and investments (36 percent) as on the government for their retirement income

> Young adults most cited way to save for retirement is by putting money in a savings account (31 percent)

Download the report (PDF)

The New Social Contract: Young adults reinventing life, work, and retirement

Young adult retirement expert 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."

"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."

Young adult retirement expert Njani Ruetsch
Njani Ruetsch

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 retire 

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.

Retirement income generally comes from three broad sources - the government (through social security), an employer (through workplace retirement plans), and an individual's own savings and investments. Young adults expect the same proportion of their retirement income to come from their own savings and investments (36 percent) as from the government. Concerns about the future funding and sustainability of social security programs should not be an extra burden for younger people whose retirement may be several decades in the future.

Globally, the most cited method for young adult workers to save for retirement is putting money aside in savings accounts (31 percent). This compares with just 22 percent who are saving in private pension/IRA and 18 percent who hold investments such as stocks, bonds, mutual funds, etc. Regarding employer-sponsored retirement benefits, only 18 percent of young adults are saving in a company-funded defined benefit plan and 15 percent are saving in an employee-funded defined contribution plan.

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".

The New Social Contract: Young adults reinventing life, work, and retirement contains in-depth analysis, country comparisons, detailed recommendations and comparisons between young adults and workers of all ages across 15 countries. It is based on findings from the 9th Annual Aegon Retirement Readiness survey series calling for a new social contract.

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

About the authors

This report and The New Social Contract series are a collaboration between Aegon Center for Longevity and Retirement (ACLR), and nonprofits Transamerica Center for Retirement Studies® (TCRS) and Instituto de Longevidade Mongeral Aegon.

The findings of the report are based on an annual survey of 15 countries spanning Europe, the Americas, Asia, and Australia.