Millennials in America believe they need over $1.6 million saved to retire comfortably, yet many find themselves far behind this goal. According to a study by Northwestern Mutual, the average Millennial has saved just $62,600 for retirement, leaving a deficit of $1.59 million. Financial challenges, including the rising cost of living and salaries that haven’t kept pace with inflation, exacerbate these shortfalls.
Over the past four years, inflation has significantly increased the amount needed for retirement. In 2020, the required savings estimate was $951,000, but today, that figure has risen by 54% to $1.46 million. Millennials face harsher economic realities compared to previous generations.
They carry a greater share of outstanding student debt, with a median amount of $19,000, which is significantly higher than the amount owed by Gen X. This financial burden further complicates their ability to save for retirement.
Millennials’ retirement savings gap
Despite these challenges, all hope is not lost for Millennials. They still have plenty of time to make up the lost ground. Key strategies for closing the savings gap include investing in the stock market, maximizing 401(k) contributions, contributing to a Roth IRA, and adding to a regular brokerage account.
Historically, stocks have generated annual returns of about 10%, providing significant growth opportunities for long-term investors. Additionally, living below one’s means, rather than just within them, can help increase savings and ensure financial stability in retirement. By cutting expenses now, Millennials can save more and benefit from the power of time and compound interest.
Ultimately, while the $1.6 million gap may seem daunting, Millennials still have nearly two decades to bridge the divide. By taking concrete financial steps today, they can work toward a secure and comfortable retirement, free from the worry of outliving their savings.
