Prudential study: Babies born today will likely need nearly $2M to retire

Image shows a baby and money — Gen Beta babies will face a different retirement than their parents, a new study finds.

By John Hilton

Babies born today are going to live a very different life filled with technological advancements and healthcare innovations, a new Prudential study finds.

One thing that won’t change is the need for a bountiful retirement nest egg. It might actually be more important than ever if life expectancy resumes rising.

For sure, recent trends of self-directed retirement plans with an emphasis on saving earlier in life will continue.

Prudential is taking that early saving idea right to the front of the line. In a new campaign to promote saving for retirement from birth, the insurer is awarding $150 bonuses to qualified “Gen Beta” babies born on Jan. 1.

The campaign includes a new research report titled, “Generation Beta: Redefining Life, Longevity, and Retirement."

While the money might be small amount, it provides the starting seeds for a nest egg that can look very healthy by the time today’s newborns are ready to retire, said Reggie Willhite of Prudential Advisors.

“There's a lot of uncertainty on the horizon for this coming generation,” he said. “I think the biggest thing is for parents of the coming generation to really emphasize financial preparedness and financial literacy so that we can leave the next generation in the best place possible.”

Big retirement target

Generation Beta, or Gen Beta, is the proposed name for the demographic beginning with 2025 and ending in 2039. Futurist and demographer Mark McCrindle also coined the name Generation Alpha for those born in the early 2000s through 2024.

“With the potential to live the longest lives of any generation, Generation Beta is poised to redefine life, longevity, and retirement in ways we can only begin to imagine,” the Prudential study concluded.

Living a quality life into the late decades of the 21^st century is not going to be cheap. Respondents predict that Gen Beta will need approximately $1.88 million to fund a decent retirement.

“Basically, anyone that retires has to become a millionaire two times over,” Willhite noted. “And that's a tall ask and can be very scary for a lot of people, and a lot of parents who are bringing children into this world.”

Prudential surveyed 2,008 Americans with a focus on key audiences: Gen Alpha parents, prospective Gen Beta parents, grandparents, and child-free individuals. The surveys were supplemented with literature reviews, consumer focus groups and expert interviews.

The wide-ranging study produced a bevy of findings in areas of Life, Longevity and Retirement:

Life: The Technology Age

Not surprisingly, the study expects Gen Beta to inhabit a world "shaped by technological breakthroughs, evolving family structures, and shifting societal norms." Experts and respondents say that will mean more flexibility and "fluid" work lives and family dynamics.

Among the findings in this area include:

Technology: People overwhelmingly agree that technology will define this generation; the majority see it as a force for good, with 58% predicting that tech will make their lives better. In many ways, tech could become an extension of humanity, with 54% believing that AI/robots will be able to empathize with humans in the future.
Family Dynamics: Traditional family structures are expected to evolve, with 86% believing traditional nuclear families will not be the norm in the future. Sixty-eight percent believe that Gen Beta will have more pets than children, signaling a shift in priorities and one that will change the dynamics of retirement, financial solutions, and generational caregiving as we know it today.
Workplace Shifts: How Gen Beta will work will look vastly different, with 80% expecting they will pursue more than three distinct career paths over their lifetime and 86% believing Generation Beta will have jobs that haven’t been invented yet.

Longevity: More time and more needs

Medical and technological advancements are likely to extend life expectancy, the study found. That means Gen Beta will face "opportunities and challenges" tied to living longer lives over the coming decades. Those challenges include:

Healthcare Innovation: 51% believe that cancer will be cured by Gen Beta. However, only 4 in 10 think obesity – a persistent health issue – will be eradicated, highlighting some skepticism about the broader behavioral shifts required to support longer health spans as well as life spans.
Economic Uncertainty: Despite optimism, financial instability looms. While 55% believe that Gen Beta will be wealthier than their parents, 61% also predict they will face more financial uncertainty.

Retirement: A new paradigm

By the time today's newborns reach retirement, it will be "less about stepping away from work and more about embracing flexible, purpose-driven life phases," the study concluded. The characteristics of this late phase include:

Mini-Retirements: 66% predict that in the future, retirement will be fluid as people will constantly go in and out of it. This is driven by longer life spans and evolving work patterns.
Financial Challenges: 48% of parents and future parents think their children will never retire. The people surveyed also estimate that Gen Beta will need approximately $1.88 million to sustain retirement but will struggle to be able to attain this.
Starting Earlier: 80% of prospective Gen Beta parents agree that, in an ideal world, parents would start saving for their child’s retirement from birth. In fact, the number one regret among current and prospective parents is that they “didn’t save more for my retirement.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.