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How Much Do Millennials Need to Save for Retirement?

JP Morgan set out to answer this in their study: “The Millennials: Now streaming: the millennial journey from saving to retirement.” They found a number of interlocking factors that will complicate millennials’ retirement savings strategy, including increasing longevity, automation/computerization of jobs, and reduced Social Security benefits along with the growing scarcity of pension plans.

The study suggests for millennials who start saving at age 25, they will need the following in order to retire at age 67:

Those earning a median income will need to save 4-9% pretax.

Those considered affluent will need to save between 9-14% pretax.

Those considered high net worth will need to save 14-18% pretax.

The reason higher earning and net worth individuals must save more is two-fold: they have higher taxes and less of their total income goes into Social Security. The combined effect means they have to put more of their own savings towards retirement in order to fund their standard of living.

Unfortunately, about half of millennials do not have access to 401(k) plans through their workplace (including those who do not meet the eligibility requirements to qualify for access e.g. part-time workers). The less an individual can save in a company retirement account such as a 401(k) plan, the more they will have to save overall.

Also, 52% of those aged 21-36 said their savings were in cash vs. 23% for savers of other ages. Millennials will need to incorporate an appropriate amount of equities (e.g. stocks) into their portfolio, or risk not having enough money in retirement. Bonds pay a fixed amount of income but generally do not provide the opportunity to outpace inflation that accompanies investing in equities. For money to grow, the returns earned must outpace inflation, otherwise time erodes the dollars’ purchasing power.

As technology improves exponentially, it increases the chance of a job becoming automated. Employers in many sectors are using technology to reduce the amount of jobs filled by humans--most notably manufacturing, but others sectors as well. Companies may also decide to move jobs overseas as there is increased competition from foreign workers who can work remotely for a lot less money. These challenges should be factored into millennials’ retirement plan. This also highlights the importance of an emergency fund as a fallback in case of job loss.

When it comes to financial planning, millennials will have to be more aware and proactive than previous generations to meet the ongoing challenges of the 21st century.

If you are looking for advice and insight on retirement planning, please contact us to learn more about our financial planning and investment management services. We are a fee only fiduciary advisor located in Des Moines, IA serving clients across the U.S. You can call us at 515-557-1860 or email us at

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