Our parents may have relied on a “retirement number” when calculating how to save for retirement, but for our generation, that approach rarely aligns with our priorities or financial realities

Beaches and Sunsets

Our family took a vacation this week, which included time at the beach. It’s early March, so I had a fleeting moment where I felt like the stereotypical retiree. After all, the retired life is all beaches, sunsets, and grandkids (my own kids, in this case) running around, right?

Despite what life insurance and pharmaceutical commercials may depict, these aren’t the first settings that come to mind for me when I think about retirement. I’m sure I’m not alone, particularly among my generation. The only way in which we may conform with popular retirement narratives is our anxiety about the future.

Why Most Millennials Don’t Ask For a Number

Even so, most of my peers don’t even bother to ask me about a specific long-term savings target. True to the stereotype that Millennials lack financial confidence and/or knowledge, right? Quite the opposite, in fact. In my experience, Millennials are both engaged in and thoughtful about how to save for retirement. They’re also painfully aware that a “retirement number” often doesn’t fit with their financial and economic realities. Even a benchmark savings rate may not apply.

The generation born between 1981-1996 understands that retirement savings are critical. They also understand the benefits that compounding provides, even when they’re unfamiliar with that exact term. FOMO isn’t actively undermining Millennial retirement accounts. This is nothing more than a lazy way for older or affluent groups to explain why my peers still have student loan debt and small 401(k) accounts. I have yet to meet with anyone who can’t help but book unbudgeted trips to the Caribbean when the weather gets cold.

The “Retirement Number” in Context

The idea that adults should chase a “retirement number” may date to a 2006 book that former Esquire editor-in-chief Lee Eisenberg wrote. In the years since, the Great Recession and the rise of clickbait journalism have stoked financial anxiety. As a result, the guidance continues to appeal within our society today.

Almost anyone who devotes time to offering retirement savings tips to the general public has good intentions. I also believe that much of the advice, from spending projections to withdrawal rates, is sound in theory. Yet, trouble begins when these voices fail to consider how one generation’s rule of thumb might not fit with those that follow.

The Trouble With The “Retirement Number” Concept

Several journalists have thoroughly documented the real variables that impact Millennials’ savings progress. Despite any initial attention these articles receive, they struggle to complete online. Bank surveys (27% of Millennials have a money secret!), technical writing (“Roth or Traditional IRA?”), and Twitter outrage dominate personal finance content.

Technical finance writing is everywhere. Twitter’s shortcomings are no secret at this point. The articles that most impact Millennials’ thinking are those that emphasize dramatic headlines. This clickbait is often based on a single (small) survey, extreme point of comparison, or generalized guidance from a major financial institution. The business incentive for online publications to generate these articles is clear. That doesn’t make their role in shaping public perceptions any less dangerous.

“Trouble begins when these voices fail to consider how one generation’s rule of thumb might not fit with those that follow.”

To older generations, these articles give the impression that Millennials only need a little more financial literacy and discipline. Then they would enjoy the same financial stability that Baby Boomers did at the same age. Meanwhile, constant headwinds hit Millennials. They’re forced to question and rethink every financial decision they’ve made, including the most prudent ones. Stress is the most common feelings that these articles produce. From there, the Millennial thought process seems to split into two camps: helplessness and outright rejection.

Changes in Millennials’ Priorities and Timelines

The young adults who feel helpless based on what they read are most likely to postpone difficult financial decisions. They ultimately maintain the status quo. They balance essential financial responsibilities with the lives they want to lead. But the second group has a different combination of personality, experience, and information. They reject the popular retirement narrative. In turn, they offer the best glimpse into how Millennials have started to view retirement.

Too many people have shouted counterproductive, condescending thoughts on Millennial spending preferences. Think coffee and avocado toast. In a fascinating look on the generational dynamics at play here, Amanda Mull writes for The Atlantic, “Those young people… weren’t just rejecting Folgers, but also a few other key values of their parents’ generation, which venerated things like marriage and home ownership.”

I agree that priorities and timelines have shifted. I also have seen that many Millennials now realize that the assurances on which Baby Boomers raised them no longer apply. Almost everyone’s spending and savings habits could use some improvement. Yet, focusing on small, absentminded purchases misses the point. Rather, this generation has started to show that they’re not willing to sacrifice the things in life they value or consider important. They’re not content to accept a financial system that looks different than when their parents were their age.

Savings Advice in the Years Ahead

Millennials and younger generations will continue to hear how much they should save for retirement each year. They’ll continue to hear what they should have at certain ages. Ideally, they will understand that the guidance likely doesn’t come from a source that appreciates the context in which they make financial decisions. I’m certainly not suggesting that savings goals are ineffective or unnecessary. But savings projections are highly dependent on so many factors outside of one’s control. The articles that preach specific numbers often neglect to discuss this reality in any meaningful detail.

How to Save for Retirement as a Millennial

Millennials are most likely to build and maintain savings momentum if we reduce our emphasis on specific numbers. Instead, we should focus on strong habits, automation, and incremental progress. Even young adults who have significant student loan debt or pay for child care can contribute something to a retirement savings fund. For those with a 401(k) plan at work, I encourage a contribution that earns whatever match the company offers. For others, I have seen that an automatic contribution each month — in any amount — can establish a savings habit that endures as life and financial circumstances change.

“Millennials are most likely to build and maintain savings momentum if we reduce our emphasis on specific numbers. Instead, we should focus on strong habits, automation, and incremental progress.”

Once a young adult implements these baseline activities, the key to “socially acceptable” savings rates and dollar amounts lies in constant progress. Each new year or open enrollment period should trigger at least a one percent increase in savings. Each new job change, salary increase, or bonus likewise should result in additional lump-sum or ongoing savings. And as life circumstances change — for example, if a child starting school reduces or eliminates child care payments — some percentage of the newly-available funds should shift to long-term savings. Later in life, as Michael Kitces articulated on his blog, the “empty nest” years also present a potential opportunity for large retirement savings.

Letting Go of the Retirement Number

Once in a while, a client will express to me an interest in a specific retirement target even if, deep down, she knows that her current financial circumstances won’t allow her to hit the target. Most of the Millennials couples I talk to don’t even broach the subject, usually because they’re focused on other issues. Even in the silence, though, I know they’re hearing the messages that tell them they’re behind. Just as we may not actually picture the beach for our retirement, it’s time that we shake the retirement number concept. Instead, let’s focus on what we can actually control.

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Kevin Mahoney, CFP® is the founder & CEO of Illumint, a Washington, D.C.-based financial planning company for young couples. He specializes in navigating the new financial decisions that arise during our late 20s and 30s, such as repaying student loans, buying a house, & investing savings. Kevin also works with employers and brands on a variety of Millennial personal finance events and projects, including speaking engagements, financial wellness programs, and sponsored campaigns.