Why Millennials Might Need a Retirement Reality Check

Why Millennials Might Need a Retirement Reality Check

For decades it's been a given: You join the U.S. labor force when you're young, inch your way up the ladder, then retire with something of a financial cushion in your early to mid-60s.

But a majority of the people in today’s work world don't think they'll be able to retire until they're further along in their golden years, according to a recent survey by Addison Group, a professional staffing service.

Overall, the survey found that 51% of employees are not confident that they'll be able to leave the workforce when they want to. But when broken down by generation, it appears the younger workers feel the most confident about their retirement readiness.


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Among the Baby Boomers surveyed, 55% believe they will have to work longer and leave the workforce later than their parents did if they intend to retire comfortably; half of Gen Xers surveyed felt the same. Meanwhile, Millennials had the rosiest view, with 61% feeling confident that they’ll be able to retire when they want.

What’s to blame for the bleaker outlook among older workers? Part of it could be because the recession put a dent in the career progression and net worth of many Baby Boomers and Gen Xers, as companies got rid of their management layers to deal with tough economic times. Millennials, however, aren’t necessarily better off, as many of them graduated from college saddled with record student loan debt and during a time of high unemployment rates. (Plus, only 33% of people ages 25 to 34 have $1,000 or more in savings, according to a September GoBankingRates survey.)

Still, younger workers do have one benefit their older counterparts don't: Time is on their side, meaning they have a longer time frame to take advantage of compound growth.

Need some help giving your nest egg a boost? Here are a few strategies to keep in mind.

Sign up for your company's 401(k) plan and contribute enough to meet your employer match. Not taking advantage of your company's contributions to your nest egg is like leaving retirement dollars on the table. If you're self-employed or your company doesn't have a 401(k) plan, open an IRA and set up an automated contribution to this account that works for your budget.

Estimate what your target retirement number is. You may not necessarily know all the details about what kind of lifestyle you want in retirement, but it's a good idea to at least start thinking about where you see yourself in 20, 30 or 40 years. You can also think about using a retirement replacement ratio to start crunching some numbers; generally, you may need anywhere from 70% to 85% of your current income in retirement if you think you want to maintain a similar lifestyle. (Retirement calculators like this one can help.)

Don't put off saving. Procrastination is the enemy of building a nest egg. There will always be an excuse to put off saving, such as waiting until your student loans are paid off or you get that next big raise. If you need to start small, try committing just 1% of your salary to retirement to start, then consider adding another percent when you get your next raise or have finished paying off one of your debts.

RELATED: Retire by 40? 3 Couples Share How They Plan to Make It Happen


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