Some millennials are rethinking their retirement plans in the face of uncertainty related to climate change, a new University of Arizona study finds. 

"Millennials are the first generation to reach retirement-savings-age amid the climate crisis," said lead study author Marissa Hettinger, a graduate student studying human development and family science in the Norton School of Human Ecology in the U of A College of Agriculture, Life and Environmental Sciences. 

"As a millennial myself, I was interested in understanding how we think about preparing for the future and how climate change impacts our choices," Hettinger said. "When our parents and the generations before them set up their 401k and Roth IRAs, they weren't necessarily thinking about the impacts of climate change when they reach retirement age."

Hettinger worked alongside Sabrina Helm, the PetsMart Endowed Chair of Retailing and Consumer Science and associate professor of retailing and consumer science, and Kealie Walker, a graduate student studying human development and family science. Their findings are published in the Journal of Family and Economic Issues.

The researchers interviewed 50 participants, ages 26 to 41, over Zoom. Participants were asked a variety of questions designed to explore their perceptions, behaviors and emotions around financial planning in the context of climate change. Researchers then analyzed the interview transcripts to identify prevalent themes and shared points of view.

Hettinger said the interview approach allowed the team to develop a clearer understanding of study participants' levels of "climate stress," defined as a sense of urgency and anxiety regarding climate change.

Imagined futures

For millennials navigating climate stress and uncertainty, the concept of "imagined futures" is key, Helm said. The idea reflects how people imagine the future, their emotional response to those predictions, and how those responses influence their financial decisions.

Participants in the study expressed both fear and hope when discussing retirement planning. Some imagined worsening climate conditions, leading to hesitation or apathy about financial investments. Others envisioned futures shaped by sustainability, government action and community initiatives, motivating them to align their investment strategies with their more optimistic outlook. 

The study identified parenthood as a significant factor in shaping how millennials approach financial planning in the context of climate change. For participants with children, concerns about the future amplified both their climate stress and their desire to invest in a better future for their children.

Despite uncertainty, many participants in the study shared creative approaches to their retirement planning, intended to set themselves and their families on a path to financial security. Some discussed prioritizing investments in sustainable funds or companies with strong environmental, social and governance practices, while other participants mentioned supporting community-oriented strategies or local government initiatives that bolster climate resilience.

Many participants also expressed a strong desire for greater transparency and guidance – from employers, financial advisors and policymakers – for aligning their financial goals with a more sustainable future. These interests include providing more accessible options for environmentally conscious financial planning.

"We expected there to be a group of people who see climate change as a reason to save more, while others want to use their resources now and enjoy life," Helm said. "But I was happy to see proactive coping strategies in their savings behavior. We are generally more concerned about millennials, because they tend to have lower retirement savings than other generations before them. Financial literacy, particularly among younger people, is comparatively low."

Planning ahead

While the study begins to uncover the thought processes and worldviews of millennials as they deal with climate change and their financial future, Hettinger and her colleagues acknowledge limitations in their work. Although the participant pool provided a wide array of data, the group was relatively small and focused exclusively on millennials with some level of financial education and engagement, potentially excluding the perspectives of individuals of different backgrounds. 

The researchers said future work on the subject could explore how different age groups – including Gen Z or Gen X – perceive the intersection of climate change and financial planning, as well as how cultural and socioeconomic differences impact climate stress and financial decision-making.