Young Americans are setting lofty retirement goals — and they’re confident that they’ll reach them.
A little over a third of both Gen Zers and millennials say they would need more than $1 million saved up in order to retire comfortably, according to a September survey from Bankrate, which surveyed 2,527 working adults in the U.S. over age 18. Bankrate defines Gen Zers as Americans ages 18 to 26 and millennials as those 27 to 42.
It might sound like a huge number to someone in their 20s or 30s, but retirement millionaire status is becoming more common. The number of people with over $1 million in their 401(k)s is nearly 30% higher in the second quarter of 2023, compared with that period last year, according to Fidelity data provided to CNBC Make It.
If your goal is to save over $1 million for retirement, it’s possible to get there if you’re able to save diligently. Say you start at age 25. Here’s how much you would need to save each month to retire at 60 with $1.2 million:
Earning a 5% annual rate of return: $1,056 per month
- Annual salary needed if you save 10% of your income: $126,750
- Annual salary needed if you save 15% of your income: $84,504
Earning a 7% annual rate of return: $666 per month
- Annual salary needed if you save 10% of your income: $79,953
- Annual salary needed if you save 15% of your income: $53,305
If you don’t know how much you’ll need to save in order to retire, you’re not alone.
Nearly 25% of millennial and Gen Z workers say they don’t know how much they would need to retire comfortably, according to Bankrate’s survey. Around the same amount of Gen Xers feel the same way and nearly 30% of baby boomers do too.
To figure out how much you may need in retirement, start by using CNBC Make It’s retirement calculator. You plug in information such as your current age, expected retirement age, income and savings and it generates an estimate of how much money you may need to maintain your lifestyle after retiring.
Regardless of their savings goal, most workers are confident they’ll be able to save enough to retire comfortably. Around 62% of millennials and 58% of Gen Zers are optimistic about reaching their retirement saving goals, per Bankrate.
While it’s important to have an overall figure in mind when saving for retirement, there’s another number you should pay attention to — your savings rate.
Your savings rate is the percentage of your pre-tax income that you put toward a retirement savings account such as a 401(k) or a Roth IRA. Ideally, you should aim for a retirement savings rate of 15%, including any employer match, according to Fidelity. (Check out this list of the best IRAs from CNBC Select.)
It’s OK to start with what you can. If you’re only able to put away 7% of your income, start there and aim to increase your contribution by 1% each year until you reach your goal savings rate.
“What’s important here is progress, not perfection,” Marguerita Cheng, certified financial planner and CEO of Blue Ocean Global Wealth, told CNBC Make It in June.
