Study: Due to inflation, Gen Z and Millennials will need $3 million in retirement savings to live comfortably 

According to a recent study carried out by Wealthcare Financial, by the time Gen Z and millennials hit retirement, they will need approximately $120,000 to $150,000 per year to live comfortably, meaning that the average amount they would require in their retirement fund is $3 million.

An unwritten rule has always been that $1 million dollars would provide a comfortable retirement, however as a result of inflation, the amount needed has now tripled.

The cost of living increased significantly over the last couple of years, with essentials such as home and rent prices, along with the costs of groceries, gas and other daily essentials, spiking.

“Inflation plays a big role when we are planning for retirement, especially for the younger generations, because the price of necessities will go up over the course of their lifetime,” said Shaun Tarzy, who is the managing partner at Wealthcare Financial.

However, Tarzy does acknowledge that not everyone will require $3 million to retire. That $3 million figure assumes that you will need $150,000 per annum for a period of 20 years.

“Three million dollars is the upper end of the range that will be needed, depending on current income,” Tarzy stated, “so Gen Z and millennials should use this as a goal, but not necessarily the amount they absolutely have to save to retire.”

The Wealthcare Financial study found when studying the contributions made across all age groups, their clients contribute an average of $500 to their retirement per month. 

“Unfortunately, that isn’t enough for anyone making over $40,000 a year,” said Michael Boggiano, managing partner at Wealthcare Financial. “Typically, the rule of thumb is to be contributing 15% to 20% of your gross income. If you’re able to contribute more, you absolutely should.”

The Wealthcare Financial report, set out financial goals for Gen Z and millennials including that they should have $500,000 in retirement savings by age 25, $1 million by age 40, $2 million by age 50 and $3 million by age 60. They also offered some advice for investors who are lagging behind.

“Gen Z and millennials should start by taking advantage of any employer 401(k) match offered to them, while contributing at least 3% of their income as well,” Tarzy said. “Those without an employer match should be taking advantage of any future retirement tax breaks by maxing out a Roth IRA every year and investing additional cash where they can.”