Millennials want to ensure a comfortable future by saving as much money as they can now. According to a new study, they plan to have $901,542 in the bank by the time they retire. While that's a lofty goal, it can be achievable with the right tools.
Researchers at The Real Estate Witch, a personal finance website owned by real estate agent referral service Clever, surveyed 1,000 working Americans about their retirement expectations to understand how they're preparing and how their plans may have changed because of the pandemic.
The study finds that younger people, perhaps concerned by stagnant wages and rising living costs, are aiming to stash away a bigger reserve fund. Millennials plan to save a whopping 113% more than baby boomers, who are aiming to stockpile an average of $423,337. Gen Xers plan to save $776,434, 83% more than boomers.
While boomers can often rely on pensions, millennials are less likely to have them. And since they're more likely to be juggling retirement with competing obligations like repaying student loans or saving for a home, "they're more inclined to be frugal, cautious, and safe with their money," says Elizabeth Kelly, the senior vice president of operations at United Income from Capital One. Yet even with that financial mindset, "it's more difficult for them to save, because their lifestyle costs are higher."
TREW's survey found that the vast majority of Americans, 91%, have at least some money for retirement: Their average balance is $250,813.
That number drops for younger generations. Millennials (which Pew Research defines as those born between 1981 and 1996) have an average of $166,430 set aside, according to wealth management platform Personal Capital, which analyzed the retirement savings of its more than 2 million users. The average baby boomer (born 1946-1964) has a retirement balance close to $1,029,840. Those in Gen X (born 1965-1980) have about $568,750 earmarked for the future.
Video by Ian Wolsten
The younger you are, the less time you've had to save, notes Charles H. Thomas III, a certified financial planner and founder of Intrepid Eagle Finance. Younger people also face competing obligations.
"Marriage and children, combined with goals like homeownership, are heavy competition for retirement savings," Thomas says. "Folks tend to start taking saving for retirement more seriously later in life, and [older Americans] may have already purchased a home and tackled other big goals."
About a third, 36%, of respondents polled by TREW plan to use specialized accounts, like 401(k)s and IRAs, as their primary retirement vehicles. A fifth (19%) are banking on Social Security to cover the bulk of their expenses, while 11% are relying on a pension.
Again, however, that varies by generation, with boomers much more likely than millennials to rely on income outside of personal savings. About a third, 32%, of boomers expect to have Social Security as their biggest source of retirement funds, versus 10% of millennials. Nearly half of millennials, 45%, plan to rely most on their 401(k) and/or IRA, compared to just a quarter, 24%, of boomers.
Millennials have spent most of their lives hearing dire predictions about the future of Social Security. Currently, the Social Security Administration projects it will only be able to pay beneficiaries in full through 2037, nearly a decade before the oldest millennials turn 65.
In the face of that threat, experts say that millennials' efforts to save on their own are well-founded. Aim to put at least 15% of your monthly income in a 401(k) or IRA. Even if you can't manage that, work to save enough to get your employer's full 401(k) match, if it offers one. Any amount you save can help, thanks to compound interest.
"Taking advantage of an employer's match is valuable, whether you are 25 or 75 [years old]," says Thomas. "Even if it's saving 1% in your 401(k), and building on that success over time."
Securing a comfortable future typically means saving as much as you can early. But regardless of where you are on your journey, there are strategies to help get your finances on track. If you're a boomer or older Gen Xer who's fallen behind on saving for retirement, now is the time to regain focus, Dorothy E. Bossung, a certified financial planner and executive vice president of Lowery Asset Consulting, previously told Grow.
"Cut back on unnecessary expenses, [and] pay off your credit cards," she said. Even if you find you need to "work a bit longer in your current job or seek part-time employment in retirement to afford everything you want," don't think you can't reach your goal.
Need help deciding how much to set aside? Check out Grow's retirement savings calculator to pinpoint a savings goal tailored to you.
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