How My Millennial Clients Need to Adjust Their Retirement Plans Based On Peak 65

A historic number of Baby Boomers are turning 65 this year, a phenomenon dubbed Peak 65, putting retirement readiness in the spotlight.

While they face unique challenges, such as rising healthcare costs and longevity risk, these issues also serve as a cautionary tale for millennials. Millennials have the advantage of time, but if they don’t optimize their strategies now, they could face similar hurdles down the road.

As a millennial finance expert, I often tell my peers that small, consistent actions taken today can significantly impact our future retirement security.

The Social Security program faces funding challenges, which could impact the future benefits millennials receive. While feeling overwhelmed is easy, millennials should recognize they have more time to invest and can leverage compounding growth.

Taking a cue from the financial hurdles boomers face, such as inadequate savings or underestimating healthcare expenses, can guide them toward better preparation.

Moreover, the financial environment is increasingly complex, with fluctuating markets, new asset classes (like cryptocurrency), and a shifting tax landscape. Employers, too, may continue to move away from pensions or specific benefits, so millennials need to be proactive in securing their own retirements.

What I’m Telling My Clients

1. Max Out Employer Plans and Automate Increases

If your employer offers a 401(k) or similar retirement plan, start contributing enough to capture the full match; otherwise, you’re leaving free money on the table. Many plans allow automatic contribution increases—by 1% or so annually—which can painlessly boost savings over time. If affordable, consider maxing out your retirement plan for tax-advantaged savings.

2. Diversify and Consider Future Tax Scenarios

Roth 401(k)s and Roth IRAs can be strategic for millennials. Paying taxes on contributions now could provide tax-free withdrawals in retirement, a big advantage if you find yourself in a higher tax bracket later in life. However, pre-tax deductions could offer meaningful relief for individuals currently in high tax environments. 

3. Plan for Healthcare Early

Health Savings Accounts (HSAs) are especially powerful if you have a high-deductible health plan. Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses remain tax-free. Over time, these accounts can help offset the escalating healthcare costs that boomers currently face.

Moreover, maintaining an active lifestyle and prioritizing your health today could help reduce future medical costs.

4. Prepare for Longevity and Uncertainty

Longer lifespans mean your retirement could span 30 or more years. When appropriate, consider insurance products (like long-term care insurance) or riders on life insurance policies that can help with elder-care expenses.

I also advise creating scenario plans, looking at potential Social Security shortfalls, and running simulations of various market returns to ensure your portfolio can weather downturns.

The Bottom Line

Boomers turning 65 in record numbers is a crystal ball into the challenges millennials will eventually face. By saving diligently, diversifying investments, and planning ahead for healthcare costs and longer retirements, millennials can avoid the pitfalls some older adults are experiencing today. Ultimately, millennials who make consistent, proactive choices now stand the best chance of enjoying a secure and flexible retirement in the decades to come.