This Generation Will Have to Save More for Retirement. (Hint: It Begins With an “M”)
According to this retirement calculator, I’ll be broke by the time I’m 75.
OK, so that’s only if I keep saving for retirement at the same rate for the rest of my career.
But still, saving enough for a realistic retirement is pretty stressful to think about. And while I’m not quite as stressed as my co-worker, it might be because I’m just living in a state of denial.
But it looks like I’m not the only one.
According to the latest retirement confidence survey from the Employee Benefit Research Institute, 63% of workers aged 25 and up who calculated their retirement goal said that they would need to save less than $1 million by the time they retire. A very frugal 21% said they would need to save less than $250,000.
Millennials Will Need to Save More for Retirement
Conventional wisdom recommends saving between $1 million and $1.5 million to retire comfortably. And while not everyone has to hit that benchmark, up-and-coming millennial retirees will have to save a bit more than those who have gone before us.
The issue is that millennials and Generation Xers (and everyone who follows) are going to miss out on something that our parents and grandparents depend on: Social Security.
It’s an inevitable truth — Social Security benefits are running out faster than we can replenish them. In fact, it’s projected that by the year 2034, benefits will be reduced by about 25%. And while that model, functioning at about 75%, will be sustainable for a while, there’s no concrete information on how the system will progress into the future.
But we’ll skip speculating on how our grandchildren will live when they retire (they’ll be floating around in plastic bubbles because we’ve wrecked the planet, so what will they care?), and just focus on that 25% reduction figure.
In 2016, the average monthly Social Security benefit was $1,360. If we take 25% of that number, we end up with a $340 reduction in benefits. This means that during each year of retirement, we’ll be living on the future equivalent of $4,080 less than retirees are living on now. And considering most people spend about 20 years in retirement, that’s a deficit of about $81,600.
Another thing that will affect how much you need to save? People are starting to live longer and healthier lives, and there’s a good chance some of us will outlive our retirement accounts — especially if they’re under that million-dollar mark.
So What’s a Millennial to Do?
Bottom line: Millennials will have to save more money for retirement.
If you’re worried about your own funds, start by actually planning out your retirement. I’m firmly in camp “it can’t hurt to oversave,” so I like to inflate my numbers juuuust a little for the fun of it. Besides, I know that as I develop in my career I’ll have the ability to add a little extra to my retirement account each month.
Whatever you do, don’t settle for being a part of the two-thirds of Americans who aren’t saving for retirement at all.
The only thing worse than turning 65 and worrying about not having enough money is turning 65 and worrying about having no money.
Your Turn: Do you know if you’re saving enough for a stress-free retirement?
Grace Schweizer is a junior writer at The Penny Hoarder.