Retirement Generation Gap
Posted On September 16, 2011
Millennials and Generation X will have to save much more for retirement than their parents’ generations, according to recent surveys of investment advisors. In a 2010 Scottrade survey, most (77%) advisors set the “number” at $2 million or more for Millennials. More recent surveys have set slightly lower targets for these generations, but the goals are still substantially higher than they were for Baby Boomers.
Both generations will have to wait until at least age 67 to receive full Social Security, since they were born after 1960. By mid-century, 70 is likely to be the typical retirement age. In more recent surveys, advisors calculate that Gen Xers will need about 16 times their final salary in order to retire comfortably. For a Gen Xer making $75,000, that amounts to about $1.2 million. For Millennials, that figure would be about $1.4 million, as they are advised to have almost 19 times their final salary saved.
Getting to those either of those figures is likely to be a tall order. Millennials starting work at 25, for example, would have to save close $8,000 a year and assume a decent rate of return in order to reach $2 million in retirement savings. Advisers counsel younger generations to start planning as soon as possible, and to take advantage of employer assistance, to utilize instruments like Roth IRAs and 401ks, to delay claiming Social Security, and, most of all, to focus on “the things that you can control, such as the percent of your gross income that you save and to really focus on your career and moving up the salary chain.”Work