Meet the generation that may never retire: Why some millennials are behind on savings — and how they can catch up

🌈 Abstract

The article discusses the retirement savings challenges faced by millennials, including the need for significant savings, obstacles like student debt and housing costs, and strategies for getting retirement savings back on track.

🙋 Q&A

[01] Retirement Savings Challenges for Millennials

1. What are the key retirement savings challenges faced by millennials?

• Millennials are expected to need around $1.7 million in retirement savings, but the average millennial only has around $63,000 saved so far.
• Millennials face obstacles like student debt and high housing costs that make it difficult to save for retirement.
• The future of Social Security is uncertain, and longer lifespans mean millennials will need more savings.

2. How do millennial retirement savings compare to previous generations?

• Only about 62% of Americans aged 35-44 have a retirement account, with a median balance of $45,000.
• The common rule of thumb is to have saved 100% of your annual salary by age 30, but many millennials are far behind this milestone.
• Some boomers have had to postpone retirement or return to work due to insufficient savings, and millennials face similar risks.

[02] Determining Retirement Savings Needs

1. How do experts recommend determining how much retirement savings is needed?

• Fidelity recommends planning for 55-80% of pre-retirement income to maintain one's lifestyle in retirement.
• The "100% of salary by age 30" rule has issues, as salaries and cost of living vary greatly.
• Experts recommend having 3 times your annual salary saved by age 40, as compound interest can help grow savings.
• Online retirement calculators can provide personalized estimates, but have limitations in accurately predicting future needs.

[03] Strategies for Millennials to Catch Up on Retirement Savings

1. What strategies do experts recommend for millennials to get their retirement savings on track?

• Start saving whatever you can, aiming for 10-15% of pre-tax income in a retirement account like a 401(k) or Roth IRA.
• Take advantage of any employer retirement account matching.
• Ensure your investment portfolio has the right mix of stocks, bonds, and cash based on your age and risk tolerance.
• Build up an emergency fund with at least 6 months of expenses.
• Avoid carrying credit card balances, as the high interest rates can erode savings.

2. What challenges remain even with these strategies?

• Some millennials may still not be able to save enough for their desired retirement, and may need to work later in life.
• Factors like future living situation and health needs make it difficult to accurately predict retirement savings needs.