Here’s How Much Gen Zers and Millennials Say They’ll Need To Retire

damircudic / Getty Images

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Planning for retirement is, by definition, an inexact science. There are so many variables that go into long-term financial planning, from inflation and interest rates to investment performance and longevity, it can be hard to get it all right.

But this is one reason why it’s best to save and invest as much as you can throughout your working career. That way, if you end up living longer than you expect, if you underperform with your investments or if costs are higher in retirement than you anticipate, you’ll still have enough to cover your needs.

For younger generations, such as Millennals and Gen Zers, knowing how much will be needed can be even trickier, as retirement is still roughly 20 to 45 years away for those age groups. Financial education is essential for these generations so that they don’t underestimate how much they’ll need to save.

To determine the status of retirement planning for Millennials and Gen Zers, GOBankingRates conducted a survey of 1,005 American adults regarding various financial habits. Results were analyzed by specific age groups rather than by generation. For purposes of this study, those in age group 18-24 are considered Generation Z while those in age groups 25-34 and 35-44 are considered Millennials.

Here’s a closer look at the results.

How Much Are Gen Zers and Millennials Saving?

Approximately 45% of Millennials in the study and 54% of Gen Zers feel that they’ll need between zero and $1 million in savings to retire comfortably. The biggest single response was from Gen Zers, 32.58% of whom said they anticipate needing between $500,000 and $1 million to retire comfortably. 

Are These Realistic Amounts?

The amount of money you’ll need to live a comfortable retirement depends on a lot of variables. One of the most important of these is lifestyle.

If your idea of retirement is flying first class around the world, taking extravagant cruises and living your life mainly in hotels, then $500,000 isn’t likely to cut it. On the other hand, if you plan to enjoy a fairly sedentary, home-based retirement in a low-cost state like Mississippi, then half a million dollars may be more than enough.

One thing that many Gen Zers and Millennials may be overlooking, however, is the effect of inflation. Even if today, $500,000 may indeed be enough for the type of retirement they envision, it won’t be worth nearly as much in 20 to 50 years, thanks to inflation.

In fact, 20 years out, half a million dollars today will only be worth the equivalent of about $276,000, assuming a steady 3% inflation rate. In 45 years, that $500,000 will only have about $132,000 in purchasing power.

In other words, if Millennials and Gen Zers think having $500,000 in retirement savings will give them the same quality of life decades in the future as it would now, they are mistaken, and steps should be taken to rectify this.

What Lifestyle Changes Might These Generations Have To Make?

The best way to make a retirement nest egg last is to maximize your savings and investments while still working.

After you retire, steps like downsizing, trimming expenses and generating additional income from a side gig are options, but they are all less desirable than simply building a larger nest egg in the first place.

To that end, the best steps for younger generations to ensure their retirement security include the following:

Invest as Early as Possible

If you save even as little as $100 per month starting at age 20, you’ll end up with about $527,000 by age 65 if you earn an 8% return on your investments. But if you wait until age 30, that $100 per month will grow to just $229,000.

If you’re looking to hit $1 million in your nest egg, saving just $190 per month at an 8% return should be enough to get you there if you start age 20. If you wait until you turn 30, you’ll have to kick that up to about $440.

Earn a Sufficient Return

Treasury bills and high-yield savings accounts are great places for things like your emergency fund, but even at current yields of 5% or more, they aren’t enough to build a sizable nest egg.

If you start at a young age, you can afford riding out the ups and downs of the stock market — and even take advantage of them by adding more money when the market is down — and earn a long-term return closer to 8% or 10%, historically speaking. This is the type of return you’ll need to generate real growth in your retirement account.

Don’t Rely on Social Security

Although Social Security isn’t likely to ever “go away,” benefits may be cut by the time Millennials and Gen Zers retire.

The best retirement planning strategy is to rely on your own savings and investments to build your nest egg, and to consider any Social Security payments to be the gravy on top. This way, you may very well end up with a retirement income that’s more than sufficient for your needs.

Share This Article: