Will millennials ever be able to retire?

Retire? Is it time to think about that already?

If you were born between 1980 through 1995, you've likely already heard you've been tagged as a "millennial." You've also heard the news reports that your generation is mired in student loan debt. When you first entered college or the workforce, you may have faced misconceptions about your age group. You are the focus of almost every advertising or marketing campaign. Mostly, you are simply building your career, planning for your future, and enjoying life without all the hype.

Secretly, you know retirement isn’t as far off as it seems. If you're like most millennials — in fact, about 70% of millennials — you started saving for retirement in your early 20s. But saving is one thing. Planning is an entirely different ballgame. But it's been a hot minute since the last major life event, right? Let's just get through one life stage at a time.

Once you got over the hurdle of the Great Recession, you may have felt your financial life getting easier. And then COVID entered your timeline. If nothing else, you are becoming an expert at navigating change. So how are you adjusting your plans for retirement now? If you don't even think that far ahead, you're not alone.

How much will you need to retire? When do you plan to retire? What do you want retirement to look like? The biggest question may be this doozy: Will I ever be able to retire?

The good news is, yes, millennial retirement is most definitely for real. But as is the case with most everything in the lives of millennials, retirement is being redefined by your generation, so it will look different than ever. Let's look ahead.

When do you plan to retire?

Depending on where your specific life path has taken you — and when you were born — you may have a more or less detailed retirement plan than other people your age. Don't compare your finances to others but do set a timeline for your financial success.

You may have already started a 401k retirement account through your employer, or you may still be working your way up to those kinds of perks and benefits. You may be self-employed and not have an employer to help you build up your retirement savings. You may be married with kids or still single. Your financial planning progress will look different than anyone else's.

At what age should you have your retirement plan all hammered out? That's a good question, too. Some millennials are still in their 20s, a big chunk are navigating their way through their 30s, and the oldest millennials are in their 40s. It's completely acceptable not to have all the finer details ironed out, but it is never a bad age to start asking yourself the questions and finding the answers.

At what age will millennials retire?

Good question. How can you save money if you don't know when you will need to start using it? Even if you know when you want to retire, how long will you be drawing off those savings?

The first step in answering this question is to consider the retirement age according to the federal government. The Internal Revenue Service has specific guidelines for when you must start drawing off your retirement account. By age 72, you must start taking money out, but you can begin as early as age 59 1/2 if you plan to retire early.

The real key to determining when you want to retire is when do you think you can achieve financial independence — when can you afford to cover your living expenses without a source of income besides your retirement account?

The smartest way to decide may be to count backward. Snag yourself a handy retirement calculator and do the math for a range of ages. Determine how much you must save now if you plan to retire at age 72, 68, or 62. As it stands today, you don't have to know an exact age, but you should have a clear idea of how much you should be setting aside now to make retirement a reality.

Don't determine your retirement plans based on what previous generations have chosen to do. That's just not how you roll as a millennial. Decide what age is best for you and chart your course to retirement.

Are millennials saving enough for retirement?

Another good question. You might think the answer here is, "Of course not," but there are several factors to remember about your retirement saving objectives. Millennials under 35 have saved a little over $37,000 in their 401k, according to Vanguard. Whether that sounds like a little or a lot depends on your financial wellness plan.

Standard of living

Yes, the age of retirement will be a factor in your retirement savings, but so will your lifestyle. Everyone's standard of living is different and likely will change again before you retire. There may be guidelines on the world wide web, but not fixed dollar amounts. "Enough" is a pliable amount.

Employer benefits

Millennials are realists, though, and realize that saving for retirement is a here-and-now necessity. On average, millennials began savings nearly a decade earlier than their baby boomer parents did. Millennials also view retirement investing as an opportunity to expand their financial literacy, try new investment options (yes, that includes cryptocurrencies), and take advantage of retirement benefits from their employers.

If you are offered a 401k plan, especially one with employer-matching funds, enroll and begin contributing the moment you are eligible. Remember, it's not free money, it's your money and part of your employment compensation package. Snag the additional savings opportunity and take advantage of any financial advisory services that come with the company holding your 401k.

Savings growth

Even if you have not resolved the details of when or how you plan to retire, it is still important to start saving. Ideally, the right time is now-ish, not later-ish. The challenge with putting off your saving for retirement until later is that it means missing out on a big benefit: compound interest. The way compound interest works means that the difference between starting your retirement planning at 20 versus 50 is financially significant.

Future earnings

The correct amount to save is as much as you can from now until retirement. And a little more if you can find it in your budget. Remember that your peak earning years are still ahead of you, and so is the possibility of inheriting money from your parents. Rather than guess exactly what's ahead financially, get busy saving and growing your savings now.

How do millennials feel about retirement?

For many millennials, retirement should look a lot like life today. Yes, the kids will be older, you'll be older, and your income will be from your investments not by showing up at your place of employment, but otherwise, it's going to look similar to your life today. A 2017 report from Merrill Edge showed that nearly two-thirds of millennials are saving to live their desired lifestyle, not just to stop working.

Sure, older generations may have viewed retirement as the point in time when they leave their employer and settle into a life of golf and grandkids. Not millennials. As a millennial, you are three times as likely to switch jobs than previous generations, so leaving a job isn't a fixed point at the end of your career. Retirement isn't a life stage, it's a continuation of your current life with different income streams.

Because retirement, or whatever the later years look like for millennials, will be unlike older generations, it is more important than ever to seek out a financial advisor who can help you design a financial strategy for your no-longer-nine-to-five life.

Will millennials have social security when they retire?

Generation X is wondering the same thing. The Nationwide Retirement Institute polled the generation ahead of you, and 83% expected Social Security to run out before they can earn all their benefits, compared to 77% of millennials.

This may be equal parts that millennials have not needed to think far enough ahead about the policies of the Social Security Administration just yet. (When asked, most millennials thought the age at which retirees receive full social security benefits was age 52 — it's actually 67.) The same Nationwide Retirement Institute survey also recognized that nearly half — 47% — of millennials don't expect to earn any social security money as part of their retirement.

For many millennials, retirement security will be in their own hands, not from the money they have paid into Social Security. From a generation that has navigated many financial road bumps at a national and international level, it's no wonder you may choose to develop your own financial strategy.

The numbers behind Millennials' savings habits

Like most other aspects of your life, millennials are far more apt to make decisions based on what's best for you rather than put your faith in what older generations may have done in the past. According to a survey from Charles Schwab, millennials began saving for retirement nearly a decade earlier compared to baby boomers. Compared to Generation X, they also had higher 401k balances compared to Gen Xers at the same age.

Most people who aren't saving as much as they'd like attribute the challenge to outstanding debt. Another plus for millennials when it comes to saving is lower credit card debt than previous generations. The average credit card credit balance for millennials, according to a 2021 statistic from Experian was $4,569 — only 73% of what baby boomers owed on average, and just 63% of what Gen Xers owed.

The downside, of course, for millennials is student loan debt. 3.49 million millennials have some student debt, with an average of $38,877. Paying toward debt certainly prevents millennials from contributing to their retirement savings as much as they would undoubtedly like to contribute.

Tips for starting your retirement planning now

Paying down debt, attitudes about retirement, and savings contributions all influence millennials' ability to plan for retirement. If you want to get started on how to develop a solid retirement plan, here are some tips to kick off, or even boost, your retirement savings effort.

Open your retirement account

Start a 401k or an individual retirement account (IRA), if you don't have one yet. You may prefer a Roth IRA, depending on your tax preferences, or a SEP IRA if you are your own boss. Oh, and be sure to make deposits into your account automatically.

Bump up your retirement account

Escalate your savings amount by 1% a year. The difference probably won't be enough to seem like much in your day-to-day now, but it will pay off down the line. If you reach your max contributions, there are options for additional accounts, like adding a Roth IRA.

Get expert help

Your retirement is too darn important just to piece it together yourself. Don't go it alone. Set up an appointment with a financial advisor if you want the input of an expert. Many community banks and credit unions offer financial advice, retirement accounts, and the knowledge of additional professional services in your community.

Set a retirement target

Take advantage of one of the many retirement calculators available online to gain a clear idea of how much to save for retirement. Putting away something is better than nothing but putting away the right amount to keep you happy in your post-work years is smarter.

Separate your retirement savings

Treat your retirement savings differently than your general or emergency savings. Your 401k or IRA are not there for you to turn to in emergencies, you'll probably incur penalties if you try to use them this way anyways.

Your savings account should be your go-to resource for surprise car troubles or trips to the emergency vet clinic. Your retirement accounts should stay untouched until you're ready to retire.

Prioritize future you

Before you say, "I can't afford it," as a knee-jerk response to the idea of developing a retirement strategy, stop and think. People base their ideas of what they can afford on what they prioritize paying for. Prioritize your future. You are worth it.

Financial security for millennials isn't a pipe dream

You will be able to retire — whatever retirement looks like to you. The key to reaching your retirement goals is to begin saving today, continue saving for the future, and recognize that your future looks like no other. Make the effort to invest in yourself today.

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