A study of 2,000 adults aged 20-40 found 61 per cent expect to have the same – or better – standard of living as their parents when they retire.
But while 52 per cent have set financial goals to keep them focused on saving for the future, just 22 per cent are on track to meet their target.
Instead, a third (33 per cent) are focused on saving for a house deposit while 28 per cent are building a cash buffer for unexpected expenses.
Others are putting their spare cash towards a wedding (12 per cent), starting a family (17 per cent) or a one-off event such as a holiday or new car (24 per cent).
Concerned for retirement
The study, by saving and investing app Moneybox, also found 87 per cent are concerned about saving for their retirement but 49 per cent feel they can’t afford to at the moment.
As a result, only 35 per cent are contributing to a workplace pension, with just 11 per cent maxing out their payments.
While 12 per cent have chosen to invest in ‘higher risk’ trading options such as crypto.
Ben Stanway, co-founder of Moneybox, said: “It is clear from our research that many young adults are beginning to realise how much they will need to save to be able to enjoy a comfortable retirement.
“The challenge they face is significant, especially when you consider changing external factors such as the rising state pension age and the fact that many are currently using most of their income to fund their day to day lives and to save for shorter-term goals, such as buying a house, getting married or starting a family.
"For many, there is little left to go towards something like their retirement.
“While at times it can be difficult to see past our more immediate financial needs and goals, we hope to help everyone get on the right track towards securing a retirement they can look forward to.
"To do this, we need to change the perception that retirement is something you only need to think about in mid-life, to being something you actively plan for alongside your short, mid, and long term financial goals.”
The study found more than half (52 per cent) of those polled have considered the annual income they would like to have when they retire.
Of those, 42 per cent have done so as they are concerned about their standard of living in retirement, while 40 per cent want to be able to retire comfortably as soon as they are able to.
But 38 per cent fear they may not be able to retire when they want to.
Of those who have not considered their retirement income, 44 per cent said it feels like an impossible task while 36 per cent simply don’t know where to start.
Nearly a third (31 per cent) went as far as to say it ‘scares’ them to even think about it.
Importance of saving
It also emerged that just 37 per cent feel they have been taught the importance of saving for retirement.
Ben Stanway, from Moneybox, [https://www.moneyboxapp.com/academy/] added: “It is clear there is a lot of confusion and even anxiety around this topic and this is something we are committed to helping address.
“The lack of financial education provided during our school years has resulted in many being unclear on the actions they should be taking in their 20s and 30s to maximise their retirement savings, but there are some simple and cost-effective steps that everyone should consider now to help get more clarity on how to plan for life after work."
MONEYBOX’S TOP FIVE TIPS TO HELP YOU TAKE CONTROL OF YOUR RETIREMENT SAVINGS:
1. Set a goal to help you stay focused:
A great first step is to think about the annual income you would like to have when you retire.
A good benchmark could be two-thirds of your current annual salary, assuming that by retirement age you’ll likely have reduced some outgoings such as commuting costs, any mortgages, and childcare costs, but want to enjoy a similar standard of living as you have now.
It's a good idea to keep reviewing this figure as your salary changes throughout your working life and you get closer to understanding what your retirement outgoings will be.
Now that you have a better idea of what your ideal retirement looks like, it will be easier to stay focused on building up your pension pot and the income sources that you will need to realise it.
2. Track down your old workplace pensions:
On average, it’s estimated that millennials will have 12 different jobs during their working life and so it can be a lot of work to keep track of all your old workplace pensions.
The free Moneybox Pension Provider Search Tool can help you track down your old workplace pension providers.
Their team of Pension Detectives will do all the heavy lifting and even help you consolidate old pots into one simple personal pension so you’ll have full control and visibility over where all your pension savings are invested.
3. Make the most of free money available:
If you currently have a workplace pension, it’s important to find out if your employer offers more than the minimum 3 per cent contribution and, if so, how to maximise those employer contributions.
While this might mean you have to slightly increase your own monthly pension contributions, the additional top-up to your pension could make a big difference to the value of your pot over time.
The sooner you do this, the longer your investment will have to grow over time. Also, don't forget that you don't have to pay tax on the contributions you make into a pension.
4. Clarify your State pension entitlement:
Of those surveyed, 70 per cent had no idea how much they were on track to receive from their State pension.
If this sounds like you, don't worry, it’s easier than you think. Just sign up / log into your personal tax account on GOV.UK HMRC website and you can quickly find out how much you’re on track to receive.
Remember, this is dependent on your National Insurance contributions and how many years you have been working, so can be different for everyone.
5. Start NOW and enjoy the benefits of compounding:
It really can’t be overstated, the earlier you start saving and investing for your future, the better. Why? Because of compound interest.
£100 a month invested from the age of 25 could be worth £130k+ by the time you retire.
However, if you were to start later and invest £200 a month from the age of 45, you would only be likely to have £76k by the time you retire, assuming the same rate of return.
Considering the possible returns on your investments, no matter how little you might be able to contribute now, will really help when weighing up shorter-term goals vs. longer-term financial planning.