Retirement Planning for Millennials

In the journey of life, preparing for retirement can seem like a distant priority, especially if you’re a millennial focused on more immediate financial concerns like buying a home, repaying student loans, or saving for your children’s education.

Current high interest rates and inflation are also making it harder to put money aside for the future. Despite these headwinds, starting early can make all the difference in securing your financial wellbeing. To help you begin, let’s unpack the essentials of retirement planning for millennials.

Why Millennials Should Prepare for Retirement

Planning early for retirement allows you to invest over a longer term, which can help you manage finances over time.

There are several reasons why this need may be even more pressing for millennials—the generation born between 1981 and 1996:

•  Millennials are falling behind. In the U.S., millennials account for almost 50% of all outstanding student loans, with average loan balances over $42,600. Because servicing this debt can make it difficult to allocate funds to other financial goals, millennials lag other generations when it comes to saving for retirement.
• Social Security may not be a safety net. Based on current forecast and without government intervention, Social Security benefits may decrease by up to 23% as of 2034. This puts a greater burden on millennials to make up the difference by saving in advance.
• Workplace realities are shifting. Many millennials are gig workers, job shifters, and self-employed entrepreneurs, which means they lack access to employer benefits such as pensions and healthcare. This is another factor putting them under pressure to take retirement planning into their own hands.

How Much Do Millennials Need to Retire?

As you get serious about retirement planning, you may be trying to assess how much money you really need to save to manage a comfortable retirement. Not surprisingly, this depends on several factors:

• Your retirement goals. Before jumping into the mechanics of saving and investing, it’s important to define what retirement means to you personally. For instance, if you plan to stop work completely and travel or pursue hobbies, you may need a larger nest egg than if you intend to continue working later in life.
• The age you’d like to retire. While the average retirement age is 65 for men and 62 for women, many millennials aim for early retirement. Reaching this goal requires careful planning.
• Your current age. As of 2024, millennials range in age from 28 to 43. The younger you start to save for retirement, the less you may need to put aside each month. For instance, if you begin saving at age 28, you may be able to meet your retirement goals by investing 15% of your income throughout your career. Conversely, if you begin saving at age 40, you may need to invest a higher percentage of your annual income over time.
• Where you live. In states where housing, healthcare, and/or taxes are high, you will likely need to save more for retirement than in jurisdictions with a lower cost of living.
• Your current retirement savings. Thanks to the power of compounding growth and interest, saving earlier for retirement gives you a longer runway to grow your investments. Similarly, the more you have put aside in savings, the greater those earnings will be. That said, most millennials still have some catching up to do. Based on recent estimates, millennials have put aside an average of $62,600 in retirement savings. A general rule of thumb is to build a retirement account equivalent to roughly 10 times your pre-retirement salary.

Retirement Planning for Millennials: Securing Your Financial Future

•  Grow your net worth so you can free up funds to invest.
• Use those funds to set up an emergency account and contribute to other tax-advantaged savings accounts.
• As your wealth grows over time, work with a financial advisor to structure a retirement plan tailored to your risk tolerance, investment approach, and long-term goals.

Speak to a Wealth Enhancement advisor about retirement planning today.

A Guide to Retirement Planning for Millennials

Although retirement may seem far away, planning now can help you gain confidence by giving you time to build your wealth. Following these four steps can put you on the path to creating a retirement plan that meets your needs.

1. Aim for Financial Flexibility

To understand how much money you can afford to invest, take some time to list your assets (e.g., savings, investments, property) and your liabilities (e.g., student debt, credit card balances, loans) so you can take stock of your financial health.

From there, factor in your current income and expenses to create a realistic budget that allows you to pay down debt while also growing your net worth.

As you begin to make more money through both increased earning potential and your investments, you should gain sufficient financial flexibility to put a more structured retirement plan into place.

Student Debt vs. Retirement Savings: How to Prioritize

One of the most practically urgent questions for millennial retirement planning is how to balance student loan repayment against retirement contributions. Here is a simple three-step decision framework: 

1. Always capture the full employer 401(k) match first. An employer match is an immediate 50–100% return on your contribution — no investment can reliably beat it. Contribute at least enough to receive the full match before directing any extra dollars toward debt. 
2. Then tackle high-interest debt above 6–7%. Once you’ve captured your full employer match, prioritize paying down debt with an interest rate above approximately 6–7%. At this rate, the guaranteed “return” from eliminating debt typically exceeds expected long-term investment returns. Student loans, credit card balances, and high-rate personal loans all qualify. 
3. Then maximize your Roth IRA. Once high-interest debt is under control, redirect contributions to a Roth IRA. For millennials currently in a lower tax bracket who expect to earn more in later decades, the Roth’s tax-free growth in retirement is a particularly powerful advantage.

2. Set Up an Emergency Fund

An emergency fund is designed to help you cover unexpected expenses, like medical issues, family emergencies, or job loss.

Without it, you may be forced to take on high-interest debt or withdraw from your investment accounts, incurring penalties and undermining your long-term plans.

Aim to save at least three to six months’ worth of living expenses in a liquid account (such as a money market fund), where your money is easily accessible.

Once your emergency fund is in place, you can invest with more confidence, knowing you can handle life’s unexpected expenses without derailing your retirement plans.

3. Invest in Retirement Accounts That Offer Tax Benefits

Tax-deferred retirement accounts, like a 401(k) or Individual Retirement Account (IRA), as well as tax-advantaged accounts, like a Roth 401(k) or Roth IRA, are critical tools in retirement planning.

These accounts offer tax benefits that can enhance your savings growth over time. With a traditional IRA or 401(k), your contributions are made with pre-tax dollars, reducing your taxable income for the year.

Additionally, these funds grow on a tax deferred basis, meaning you only pay tax when you make withdrawals during retirement.

For their part, Roth 401(k)s and Roth IRAs are funded with after-tax dollars, so contributions are not tax deductible. On the plus side, however, all future qualified withdrawals are tax-free, making these accounts particularly beneficial if you expect to be in a higher tax bracket during retirement than you are when you set up the account.

Maximizing contributions to these accounts can significantly reduce your tax liability while helping your savings grow through the power of compound interest. Additionally, many employers offer a match on 401(k) contributions, which can further boost your retirement savings.

Ideally, you should aim to contribute at least enough to your employer-sponsored 401(k) plan to receive the maximum match, which is essentially free money that’s part of your compensation package.

2025 Retirement Account Contribution Limits

IRS.gov — Retirement Plans FAQs. Limits are subject to annual IRS adjustment — flagged for compliance review each January.

4. Work with a Financial Advisor

Retirement planning for millennials can be complex and the right strategy depends heavily on your individual circumstances. A qualified financial advisor can offer personalized advice that considers your financial situation, risk tolerance, and retirement goals.

They can help you navigate complex investment landscapes, optimize your tax situation, and adjust your plan as your life changes.

Roth vs. Traditional: Which Is Right for Millennials?

This table is for general comparison purposes only. Consult a qualified tax or financial advisor to determine the right account type for your situation. Flagged for compliance review.

The Bottom Line

Effective retirement planning is a dynamic process that requires ongoing attention and adjustment.

For millennials, it presents a unique opportunity to fortify their financial future by leveraging time, modern financial tools, and strategic planning.

By starting now and getting the advice you need, you can build a robust financial foundation that will support a rewarding retirement.

If you’d like to learn more about retirement planning strategies, contact a Wealth Enhancement advisor.

Frequently Asked Questions About Retirement Planning for Millennials

1. How much should millennials have saved for retirement by now? 

A widely used benchmark is to have saved one times your annual salary by age 30, three times by age 40, and six times by age 50 — though the right target depends on your specific retirement goals, expected Social Security income, and planned retirement age. Based on recent estimates, millennials have an average of $62,600 saved for retirement — a figure that varies significantly by income and age within the generation. (Verify against current Vanguard “How America Saves” data before publishing — flagged for compliance review.) 

2. Will Social Security exist for millennials? 

Social Security is projected to continue paying benefits to millennials, but at a reduced level if no legislative changes are made. According to the Social Security Administration’s Trustees Report, the Social Security trust fund is projected to be depleted by 2034, at which point incoming payroll tax revenue would cover approximately 77% of scheduled benefits — a reduction of around 23%. This makes supplemental retirement savings through 401(k)s and IRAs particularly important for millennials. (Verify current projection at SSA.gov before publishing — flagged for compliance review.) 

3. Roth IRA vs. traditional IRA: which is better for millennials? 

For most millennials — who are currently in lower or mid-range tax brackets but expect higher income in later decades — a Roth IRA is generally the more advantageous choice. Contributions are made with after-tax dollars today, but all qualified withdrawals in retirement are completely tax-free. If tax rates rise over the next 20–30 years (a common expectation), locking in today’s lower rate via a Roth IRA can significantly increase the after-tax value of your retirement savings. That said, the right answer depends on your specific income, tax situation, and goals — a financial advisor can help you model both options. 

4. What are the retirement options for gig workers and self-employed millennials? 

Millennials who are self-employed, freelance, or gig workers don’t have access to employer-sponsored 401(k)s — but they do have strong alternatives. A Solo 401(k) allows self-employed individuals to contribute as both employer and employee, with a combined 2025 limit of up to $70,000. A SEP-IRA allows contributions of up to 25% of net self-employment income (up to $70,000 in 2025). A SIMPLE IRA is available for small business owners with up to 100 employees. A traditional or Roth IRA is available to anyone with earned income, up to the $7,000 annual limit. (Limits subject to annual IRS adjustment — verify at IRS.gov. Flagged for compliance review.) 

5. How do I prioritize student loan repayment vs. retirement savings? 

The most practical framework: first, always contribute at least enough to your 401(k) to receive the full employer match — it’s an immediate guaranteed return that no loan repayment can match. Second, pay down high-interest debt (above approximately 6–7%) aggressively, as the guaranteed return from eliminating this debt typically exceeds expected investment returns. Third, once high-interest debt is managed, maximize contributions to a Roth IRA. This framework helps millennials build retirement savings and reduce debt simultaneously, rather than treating them as competing priorities. 

6. How much should I contribute to my 401(k) as a millennial? 

At minimum, contribute enough to capture your full employer match — this is part of your compensation and leaving it on the table is effectively a pay cut. Beyond the match, a common guideline is to target a total savings rate of 15% of your gross income (including employer contributions) across all retirement accounts. If you’re starting later or have significant catching up to do, a higher rate may be appropriate. The 2025 employee contribution limit for a 401(k) is $23,500 — maximizing this, if financially feasible, is one of the most powerful retirement-building steps a millennial can take. 

7. Is it too late for older millennials (in their late 30s or early 40s) to start saving? 

No — it is not too late, and the math still strongly favors starting now. A 40-year-old who begins saving $500 per month at a hypothetical 7% annual return would have approximately $307,000 by age 65 — before accounting for employer contributions or contribution increases over time. The key is to start immediately, increase your savings rate as income grows, and use a Roth IRA or 401(k) to maximize tax-advantaged compounding. A financial advisor can help you build a catch-up plan tailored to your specific starting point. (Hypothetical illustration only — not indicative of guaranteed results. Flagged for compliance review.) 

Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor and affiliate of Wealth Enhancement Group®. Wealth Enhancement Group is a registered trademark of Wealth Enhancement Group, LLC.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

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