How Much Do Millennials Need to Save for a Comfortable Retirement?

The answer depends on a number of interlocking factors

Everyone, including millennials, wants to know exactly how much to save for a comfortable retirement, so they can just set it and forget it. For classification purposes, the Pew Research Center says that anyone born between 1981 and 1996 is a millennial. Based on birth date, millennials in 2022 range in age from 26 to 41. That’s quite a range, and the amount you need to save will obviously depend on how much you’ve saved so far, as well as a number of other factors discussed below.

For starters, most experts suggest that you should aim for total savings and money from other sources that will generate at least 80% of your preretirement income in order to retire comfortably. At this point, of course, you don’t know how much you will be making just before you retire. One retirement planning rule of thumb says that if you save the equivalent of 15% of your pretax income until you retire, you will reach that goal. Other experts encourage saving a specific multiple of your current salary by a certain age.

Key Takeaways

  • 21% of all millennial workers lack access to an employer-sponsored retirement account.
  • Millennials won’t be able to save what they need if they don’t invest in equities.
  • Millennials face a shortage of jobs due to the effects of automation and the internet.

Savings by Age

How much you will need in retirement depends on two factors: when you retire and the lifestyle you expect in retirement. Using the example of someone who wants to maintain about the same spending level in retirement they had while working, Fidelity suggests your savings should total the amounts shown below by age, where 1X equals savings of one times your salary, 2X equals savings of two times your salary, and so forth.

Retirement Savings Needed by Age and Multiples of Salary
Lifestyle Age 30 Age 35 Age 40 Age 45 Age 50 Age 55 Age 60 Age 67
Average  1X 2X 3X 4X 6X 7X 8X 10X
Source: Fidelity Investments

If your plan is to live a more frugal lifestyle in retirement, your final goal might be eight times your salary saved by the age of 67. Conversely, if you plan to spend your retirement years traveling and living a higher lifestyle than during your working years, you savings goal by age 67 might bump up the factor to 12.

In practical terms, if you are a 26-year-old millennial, you have roughly four years to have the equivalent one year’s salary in your retirement account, which can include any employer contributions you get. If, however, you are a 40-year-old millennial, your retirement savings account should already contain the equivalent of three times your annual salary. If it doesn’t, you may have some catching up to do.

There are other factors that affect how much millennials can put away and what they end up with during retirement. The following three factors could necessitate saving even more than the above estimates, depending on your individual circumstances.

Make sure your retirement income numbers include anticipated Social Security or pension income if applicable.

1. Access to Retirement Plans

According to a 2021 Transamerica study, about 21% of millennial workers have no access to an employer-sponsored retirement plan. This can have a big impact on how much you can save in a tax-advantaged account. The less you invest in a company retirement account, such as a 401(k) plan, the more you will have to save overall.

With a 401(k), for example, individuals can contribute up to $20,500 for 2022 as a tax-deferred benefit. If they do not have access to a 401(k) plan and need to use an individual retirement account (IRA), they are capped at saving $6,000 a year in a tax-deferred account for 2022.

This means that more will have to go to a taxable savings account, thus decreasing the account’s compounding effect, as you have to pay taxes on any interest income or capital gains. In addition, you miss out on the assumed employer match in the above calculations, so you will have to save that percentage on your own as well.

In addition to saving for retirement, millennials should make sure to have an emergency fund to tide them over when out of work or facing an unexpected crisis.

2. Asset Allocation

Having the right allocation in stocks and bonds can make a big difference in how much your portfolio will return over the years. If your asset allocation is too low on stocks, you will not reach your goals. Some advisors suggest that millennials, especially those at the younger end of the spectrum, should allocate as much as 90% to 100% of their portfolio in stocks.

You simply cannot accumulate the money you need to retire without more exposure to equities. Inflation alone will destroy your dollars’ purchasing power if your investments lack appreciation potential. 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.

3. Job Uncertainty

While computers and the web have made things in general really easy, they do come with some drawbacks. The chances of your job being replaced by automation during your lifetime have increased. Some of the change arrives courtesy of COVID-19. According to a recent McKinsey & Co report, “The pandemic accelerated existing trends in remote work, e-commerce, and automation, with up to 25 percent more workers than previously estimated potentially needing to switch occupations.”

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, which lessens the need for full-time staff.

With these two factors in place, the chances of being out of work increase as corporations look to cut costs. When you are unemployed, you lose time and money to save in a retirement account and get an employer match. You also risk needing to withdraw funds from your retirement savings to keep yourself afloat. That’s another reason why you need an emergency fund.

How Many Millennials Think They Will Never Retire?

According to a recent Harris poll, 61% of older millennials said they planned to work at least part time in retirement. Roughly 14% were unsure about working in retirement, and 25% said they would not work after they retired.

What Are the Birth Years for the Millennial Generation?

According to the Pew Research Center, anyone born between 1981 and 1996 is a member of the millennial generation. In 2022 those individuals range in age from 26 to 41.

How Much Should a 41-Year-Old Millennial Have Saved for Retirement so Far?

Fidelity Investments suggests that at the age of 40 you should have saved the equivalent of three times your annual salary. This puts you on pace to save 10 times your annual salary by age 67.

The Bottom Line

There are plenty of reasons why millennials are stressing about saving for retirement. 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% of your gross income to ensure that you get to live the life you want after you bid the workplace adieu.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Pew Research Center. "Defining Generations: Where Millennials End and Generation Z Begins."

  2. Fidelity Investments. "4 Rules for Retirement Savings."

  3. Transamerica Center for Retirement Studies. "Living in the COVID-19 Pandemic: the Health, Finances, and Retirement Prospects of Four Generations," Page 28-29.

  4. Fidelity Investments. "How Much Do I Need to Retire?"

  5. Internal Revenue Service. "IRS Announces Changes to Retirement Plans for 2022."

  6. Internal Revenue Service. "Topic No. 403 Interest Received."

  7. Internal Revenue Service. "Topic No. 409 Capital Gains and Losses."

  8. T.RowePrice. "Retirement Savings by Generation: Your 2021 Portfolio."

  9. McKinsey & Co. "The Future of Work After COVID-19."

  10. Remote. "Global Workforce Revolution Report."

  11. The Harris Poll. "61% of Older Millennials Believe They’ll be Working at Least Part-Time During Retirement."

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