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How millennials should think about retirement saving

Kiplinger's Personal Finance

For millennials, retirement may be more of a challenge than for prior generations. They are almost certain to live longer than their parents, so their money will have to last longer and clear more hurdles along the way.

For starters, no one really knows what Social Security is going to look like in 30 or 40 years. No matter how Congress adjusts the system over the next decade, younger workers shouldn’t count on receiving the same benefits as their parents.

“I tell younger investors to plan as if Social Security will be nonexistent when they retire,” says Ryan Fuchs, a certified financial planner in Little Rock, Ark. “I don’t believe that will be the case. But if they can create a successful plan without it, then any money they do receive will be icing on the cake.”

After paying rent and, for many, student loans, finding the money to save for retirement might seem like an impossible task. In a 2017 survey from GOBankingRates, more than 60 percent of millennials reported having less than $1,000 in a savings account, and 46 percent of respondents ages 18 to 24 said they had nothing saved.

Sixty-six percent of people ages 18 to 29 say investing in the stock market is scary or intimidating, according to an Ally Financial survey.

“When we meet with younger clients, we’ll use simple calculations to show what saving a few hundred dollars a month can do for a portfolio when you extend that growth over 40 years,” says Nate Creviston, a CFP in Shaker Heights, Ohio.

If you set aside $200 a month and earn an average annual return of 7 percent, you’ll have $480,000 after 40 years. Boost contributions every time you get a raise, and you’ll have much more than that. Eventually, you should aim to save 15 percent of income.

Putting aside the question of Social Security, the big difference in the retirement outlook between past generations and millennials is the shift away from traditional pensions. Most private employers have moved toward defined contribution plans, such as 401(k)s.

For millennials, if your employer offers a 401(k) plan and will match your contributions up to a certain percentage of your pay, take it. It’s the closest you’ll come to getting free money.

Even without the match, a 401(k) is a strong starting point as long as it offers a diversified selection of mutual funds that aren’t hobbled by exorbitant fees. ( offers a tool that will rank your 401(k) against its peers.)

If you’re self-employed or your employer doesn’t offer a 401(k), your next best bet may be a Roth IRA. In 2019, you can contribute up to $6,000 to a Roth, as long as your income is less than the IRS’s thresholds. The money isn’t tax-deductible, but as long as you wait until you’re at least 59 1/2, all withdrawals, including earnings, will be tax-free, and you can withdraw contributions at any time without paying taxes or penalties.

Brendan Pedersen is a reporter at Kiplinger’s Personal Finance magazine. Send your questions and comments to

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