For the longest time, 65 has been the standard retirement age. Not everyone retires at that time, but enough to make it the average. But for Millennials, 65 is going to be early retirement – very early retirement.

Recent research indicates that Millennials may have to work until 75 to fund their nest egg. Here we’ll break down of those findings, and what can be done about it. (For more, see: Why Millennials May Not Be Able to Retire.)

Why Millennials Will Have to Work Longer

Unlike any other previous generation, Millennials face an onslaught of financial challenges. Student loans, rising rents and lower starting salaries point towards a depressing fact – the average Millennial will struggle to fund their retirement. The Great Recession has also made recent graduates wary of investing in the stock market, even though that’s where their money can grow the fastest.

Not convinced? A study by NerdWallet found that Millennials will have to work until age 75 to fund their retirement, compared to current seniors who only have to work until 62. That’s just one piece of research in a growing consensus, and they all point towards the same trend.

Jason Kirsch, author of “The Millennial Advantage” has said in the past that retirement was based on a three-legged stool: pensions, Social Security and personal savings. According to Kirsch, retirees used to get more out of Social Security than they contributed. That’s no longer true.

What Millennials Can Do

The silver lining is that Millennials are still young and can catch up for retirement. If they’re willing to start investing now, that is.

“In reality, if you invest early and prudently, you won’t need to save as much to get to the same point,” said Certified Financial Planner Hui-chin Chen of Pavlov Financial Planning. “The problem is most Millennials don’t get to save early. The less you save during your working years or the later you start, the longer it takes to save enough for retirement.”

So here are some strategies Millennials can use to help ensure they won’t still be working in their golden years:

  • Invest, don’t save. A survey by State Street discovered that 40% of Millennials prefer to keep their savings in a liquid account instead of investing. That’s why they miss out on the returns they’ll need to adequately secure their retirement. A high-yield savings account has an annual percentage yield (APY) of 1%, while an S&P 500 Index fund has an average 10-year return of 6.82%.

  • Save most salary increases. Younger workers see higher gains in their salary as they jump from entry-level staffers to management. Those increases can be substantial, and Millennials can capitalize by setting aside most of that money in a retirement account.

  • Spend less on housing and transportation. Those two categories make up the bulk of household expenses. The less Millennials spend on rent and car payments, the more they’ll have to save, invest and pay off debt.

The Bottom Line

In many ways, Millennials are already facing a huge disadvantage. They’re not making as much as their parents, and just about everything is significantly more expensive. Getting a head start on retirement is a bigger challenge than ever before.

Thankfully, all is not lost. If you are a Millennial, you can better the odds of retiring on time by saving more than 10% of your salary, investing that money and being aggressive in your youth. It’s either that, or embracing the daily grind well into your 70s. Which will you choose?


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