Workers seem to know how much money they need to be comfortable in retirement — previous surveys suggest it’s more than $1 million. But what they often don’t know whenWell, they need to start saving to reach that goal.
We seem to have an answer now.
Research from the Milken Institute, a nonpartisan think tank, shows that you should start Saving regularly for retirement by 25 If you expect to retire with at least $1 million set aside. Missing that deadline won’t completely destroy your million-dollar retirement hopes, of course, but it does highlight the importance of starting young when it comes to data accumulation.
What does the data say?
A Milken Institute report released last week found that the latest age for Americans to start saving for retirement is 25.
Complexity has to do with think tank logic. For example, investing $100 weekly starting at age 25 can lead to retirement savings of $1.1 million by age 65, as long as the saver can earn a 7% return. (Seven percent is the standard return when investors strive for long-term growth; under normal circumstances, this return beats inflation and then some.)
The benefits of compounding are more apparent when you start saving at a young age. That $100 invested weekly would produce nearly $300,000 by retirement age starting at age 35—a significant difference.
Of course, there are plenty of barriers that can keep workers from starting their retirement savings while they’re still young. The economy is still recovering from a turbulent few years during the Covid-19 crisis. Both homes and cars are more expensive than usual right now, and the October resumption of student loan payments will take a hit from whatever savings borrowers have built since the pandemic-era break first took effect in the spring of 2020.
These obstacles contribute to what the Milken Institute calls “temporal discounting” bias, or trouble imagining (and thus prioritizing) your future self.
“Preparing for the next 40 years can be challenging when they [young savers] Other important responsibilities need to be taken care of,” the report said.
A silver lining
On paper, it may seem that young people won’t be able to make this savings time frame as they rush to deal with more immediate and tangible expenses. But Gen Z is hyper-focused on saving for retirement.
Despite seasonal discounts and much pressure on the youngest generation of adults, nearly half of Gen Z workers say they save $2 million and expect to retire as young as 57. In fact, the demographic is saving far more in their retirement plans than previous generations did
I mean the kids are fine.
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