Everyone wants to know exactly how much to save for retirement so they can just set it and forget it. JP Morgan Chase (JPM) has tried to figure that out for Millennials — those born between 1982 and 2004. In The Millennials: Now Streaming the Millennial Journey From Saving to Retirement the full-service bank looked to answer the question, taking into account how life, the market and the government may impact any planning.

Here is a rundown of the numbers JP Morgan came up with and a look at three of the most common problems Millennials planning for retirement are likely to encounter. (For more, see: A Financial Advisor's Guide to Millennial Clients.)

How Much to Save

For this study, JP Morgan found that if a Millennial started saving at the age of 25, he or she will need to save the following to be able to retire at age 67 and meet retirement income targets:

  • Those earning a median income will need to save 4% to 9% pre-tax.
  • Those earning an income in the affluent category will need to save between 9% and 14% pre-tax.
  • Those who are considered high net worth will need to save between 14% and 18% pre-tax.

“Affluent and high net worth Millennials will need to save much more than median income earners due to higher taxes and the fact that they put less of their total income into Social Security every year. These combined effects means that they must rely more on their own savings to be able to fund their standard of living in retirement,” notes Mark Hebner, founder and president of Index Fund Advisors, Inc., Irvine, Calif., and author of “Index Funds: The 12-Step Recovery Program for Active Investors.”

In addition to the pre-tax savings listed above, Millennials will need to save 2% after tax and have an employer match of 50% up to 3% — and suddenly a straightforward answer becomes more confusing.

Many things will affect how much you can save and how much you end up with in retirement. The following three examples will have a big impact and could likely necessitate the need to save even more than the estimates above.

Access to Retirement Plans

Only 51% of employees have access to retirement plans. This can have a big impact on how much you can save in a tax-protected retirement account. The less you save in a company retirement account such as a 401(k) plan, the more you will have to save overall. If you have a 401(k), for example, you can save up to $18,000 in 2017 at a tax deferred benefit. If you do not have access to a 401(k) plan and need to use an IRA, you are capped at saving $5,500 a year in a tax advantaged account. (For related reading, see: Retirement Planning the Millennial Way.)

This means that more will have to go to a taxable savings account, thus decreasing your compounding effect as you have to pay taxes on your gains. Plus, you miss out on the assumed employer match in the above calculations, so you will have to save that percentage on your own also.

Asset Allocation

Having the right allocation to stocks and bonds can make a big difference in how much your portfolio will return over the years. If that allocation is too low on stocks, you will not reach your goals.

Unfortunately, it has been shown that the average person between the ages of 21 and 36 has 52% of his or her savings in cash. You simply cannot accumulate the money you need to retire without more exposure to stocks. Inflation alone will destroy your buying ability in retirement without stocks, so if moving to add more stocks to your portfolio is just too stressful, you will have to find a way to drastically increase your savings.

Job Uncertainty

While computers have made things in general really easy, they do come with some drawbacks. During your lifetime, the chances of your job being replaced by computers have increased. Additionally, because of widespread internet access, there is increased competition from foreign workers who can do your job remotely — and likely for a lot less than what you get paid.

With these two factors in place, the chances of being out of work increase as corporations look to cut costs. When you are out of work, you lose time to save in a retirement account and get an employer match. You also risk needing to withdraw retirement savings to keep yourself afloat. That's another reason Why You Absolutely Need an Emergency Fund.

The Bottom Line

Life is too complicated to risk saving only the minimum targets that make up a long-term retirement plan. There are many factors we didn't even cover that affect your savings. The best way to deal with all of them is to save as much as you can. A good goal is to save at least 15% to 20% of your gross income to ensure that you get to live the life you want in retirement. (For more, see: Retire Wealthy: The Millennial March to $1,000,000.)

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