Gen Y's $2 Million Retirement Price Tag

Twentysomethings will need to save much more than their parents did for retirement

September 15, 2011 RSS Feed Print

Maximize Social Security. Social Security provides a base level of income that your retirement savings should build upon. Take steps to maximize the amount you get by making sure you have at least 35 years of earnings under your belt before you sign up for payments, so that zeros won't be factored into your calculation. And carefully consider the age at which you begin to claim benefits. Payouts increase for each year of delayed claiming between ages 62 and 70.

[See 10 Ways to Boost Your Social Security Checks.]

Don't plan on retiring at 65. A male born in 1946 can expect to live 18 years after retirement at age 66, according to Social Security Administration projections. Men born in 1980 should plan for at least a 19.3 year retirement, after the higher retirement age of 67. For women, the average projected length of retirement jumps from 20 years for those born in 1946 to 21.2 years for those born in 1980. And these are just the averages. "Generation Y's life expectancy is going to be a lot longer," says Farr. "They have to fund more years of retirement than the old financial planning models built in."

Of course, you don't have to retire at age 65, or at what the Social Security Administration defines as the full retirement age, which is 66 for most baby boomers and 67 for younger people. Working a few extra years gives you more time to save, allows your investments a longer time to compound, and reduces the number of retirement years your savings must finance. If you're 25 now and willing to work until age 70, you could reach $2 million by saving just $95 per week, assuming an 8 percent annual return and not even counting the 401(k) match.

Don't get hung up on the number. How much you need to save for retirement largely depends on your expenses. If you're willing to pay off your mortgage before retirement, move to a smaller house or low-cost area of the country, and live a modest lifestyle, you may find a way to get by on less. Conversely, those who want a lavish retirement will need to save more. "If you've got a goal based upon assumptions about inflation and rates of return, it's actually counterproductive, because those numbers can be pretty big, especially for young folks," says Alfonso. "It's more important 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."

Twitter: @aiming2retire

Tags:: pensions,; 401(k),; retirement

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just save $95 per week and keep working as long as possible . you will be good to go

Kripal Singh of AL 1:57PM March 14, 2013

Are these people for real? What universe are they living in? Save $2,000,000? Most people in North America are having a difficult time making ends meet with their weekly salaries, let alone save a few hundred dollars per month...for life. I haven't saved a friggin penny, have enjoyed every aspect of my life immensely and will retire to a sunny, warm beach in a third world country after next year where I can live on a small pension. North America is not a great enough place to penny pinch for life just to have a few million dollars to pass onto your kids.

Steve 7:27AM April 24, 2012

Too damned bad you suckers listened to the "Great American Corporate and Capitalist Propaganda Whore's" and there "Sales pitch bull Shiite", and built McMansions in place of practical realistic sized, sustainable, mortgage-payable homes: with gardens not lawns, with super insulation, with Solar electric LED lighting, with Passive Solar heat instead of extra rooms, big swimming pools, great large lawns to upkeep. Poor ass-holes. I feel sorry for you! See articles on Straw Bale, on Stack wood. Look on net for housing expected in European countries - look to Denmark - net energy exporter with Wind Turbines alone - no Nukes at all! Look to Germany especially! They are so shutting down their Nukes - as fast as they can! What do they know full well, that our media keeps from us? Guess, ass-holes! China builds safe plutonium free, benign waste product, Thorium LFTR reactors - Google this! you can read! You can so Think! Never mind what you are told to believe, what you always believed, what your family believes, what "good Americans" believe! Read and see! Many Americans have gone "Off Grid" they "lurk" here on the net, without traceable addresses to be damned sure, and for their own protection. Search, watch for them! They offer good survival advice, philosophies,you need to read!

Uncle B 11:16AM October 07, 2011