Actors Christopher Mintz-Plasse, Jonah Hill and Michael Cera arrive at the premiere of “Superbad” in 2007.
(Image credit: Jason Merritt/FilmMagic/Getty Images)
Millennials are a scrappy lot, having to adjust to major tech advances and financial shocks early in their lives. They came of age during the Great Recession of 2008-2009; they are perhaps best known as the generation mired in so much student debt that they have often delayed key life milestones such as buying a house and getting married.
The lousy economic timing has also set millennials back when saving for their retirement.
Born between 1981 and 1996, millennials now range in age from 30 to 45. The average 401(k) balance for millennials is $83,700, compared with $146,400 for all generations, according to Fidelity Investments’ 4Q 2025 Retirement analysis. That less-than-six-figure nest egg also pales compared to the $1.46 million that Americans consider the “magic number” to retire comfortably in 2026, according to Northwestern Mutual’s 2026 Planning & Progress Study. It’s no wonder that more than half (55%) of Millennials — the most of any generation — think they are likely to outlive their savings. But it’s not all gloom and doom for their future.
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What is the average millennial 401(k) balance?
Weighed down by debt and an era of sky-high housing prices that crimps savings, millennials are contributing just 8.9% of their salary to their 401(k)s. Only the younger Gen Z generation, just starting out in their careers, saves less, Fidelity data show. If you add in employer matching contributions, Millennials are saving 13.5% of their salary, which falls short of the 15% savings rate Fidelity recommends.
|
Generation |
Average 401(k) Balance |
|---|---|
|
Average |
$146,400 |
|
Baby Boomers |
$270,800 |
|
Gen X |
$222,100 |
|
Millennials |
$83,700 |
|
Gen Z |
$17,900 |
Source: Fidelity 2025 Q4 Retirement Analysis.
Millennials’ poor financial health has also forced them to tap into their retirement accounts to take out loans. Nearly one in five Millennials (19.7%) have an outstanding 401(k) loan balance, above the 19.4% of all generations.
A retirement savings rule-of-thumb from Fidelity is to have 1x your salary saved by age 30 and 3x your salary by age 40. So a 30-year-old Millennial earning $50,000 a year should have a nest egg of $50,000, and a 40-year-old earning the same salary should have $150,000 socked away. Currently, only 19% of Millennials say they have saved three times their salary, according to Northwestern Mutual.
|
Of those with retirement savings |
All |
Millennials |
Gen Z |
Gen X |
|
Less than 1x my income |
15% |
20% |
25% |
12% |
|
1x |
8% |
10% |
11% |
6% |
|
2x |
13% |
18% |
17% |
12% |
|
3x |
15% |
19% |
14% |
14% |
|
4x |
7% |
6% |
6% |
10% |
|
5x |
8% |
8% |
6% |
10% |
|
6x |
4% |
4% |
2% |
6% |
|
7x |
4% |
3% |
4% |
4% |
|
8x |
4% |
2% |
2% |
3% |
|
9x |
2% |
1% |
2% |
3% |
|
10x |
4% |
1% |
2% |
4% |
|
More than 10x my income |
10% |
3% |
4% |
9% |
|
Not sure |
7% |
4% |
4% |
7% |
Source: Northwestern Mutual.
“Millennials are well-positioned to put themselves on a good path for the years ahead.” — Blake Smith
Stacey Dash (as Dionne Davenport), and Alicia Silverstone (as Cher Horowitz) in the 1995 movie, “Clueless.”
(Image credit: CBS via Getty Images, Paramount Pictures)
Millennials — Don’t be ‘Clueless’ — you have time to save for retirement
If there’s a silver lining in the financial vortex millennials are caught up in, it is this: they still have 20 to 35 years before they retire. And that’s a long enough time horizon to play catch-up.
It’s often said that time in the market is more important than timing the market. And Fidelity statistics demonstrate that the average 401(k) account balance of millennials who have been continuously saving in their 401(k) for five, 10 and 15 years still have ample time to make a run at a seven-figure nest egg.
Millennials who’ve been socking money away in their 401(k)s for 10 straight years have balances of roughly $300,000, and older Millennials who have been saving for 15 years or more have average balances of around $400,000. Since millennials are still 20 to 35 years from age 65 and the full retirement age for Social Security, workers with a current account balance shortfall can ramp up savings, invest in the stock market, and benefit from compounding over the next two to four decades.
“Millennials are well-positioned to put themselves on a good path for the years ahead,” says Blake Smith, investment advisor at Financial Partners, Inc.
But millennials, most of whom are entering the sweet spot of their careers and earning years, must act now to put themselves on a better trajectory for a secure retirement, adds Smith. “Be proactive — now,” says Smith. “Don’t defer (saving any longer).”
Millennials must start building up nest eggs to protect themselves from rising inflation, the increasing cost of health care, and the likelihood of higher tax rates in the future.
Actor Yahya Abdul-Mateen II on the set of “The Matrix Resurrections.”
(Image credit: Murray Close/Getty Images)
Blissful ignorance, or facing reality? Millennials can boost their 401(k) balances
Millennials are in a good position now to take advantage of the low income tax rates, which were made permanent in July 2025 with the passage of the One Big Beautiful Bill.
Smith says a great way for millennials to build wealth and boost their after-tax income streams in retirement is to take advantage of Roth 401(k)s (and IRAs) that allow tax-free withdrawals after age 59 1/2, provided the account has been open at least five years.
It’s important, says Smith, to not only have a diversified portfolio with a mix of stocks, bonds, cash and other assets, but also to diversify retirement savings from a tax standpoint.
Here are concrete ways to boost your retirement savings.
Take advantage of Roth accounts. To build up the tax-free portion of retirement holdings, Jonathan Lee, a wealth management advisor at U.S. Bancorp Advisors, recommends that millennials, especially those not at the peak of their earnings years, contribute to a Roth 401(k) if their workplace plan offers it. “If you are early in your career and you are not in a high tax bracket, it makes sense to use a Roth vehicle (as you won’t miss out on a big upfront tax break with a small salary),” says Lee. While contributions to Roth accounts (which grow tax-free) are made with after-tax dollars (which means you won’t get an upfront tax deduction like you would with a traditional 401(k) funded with pre-tax dollars), withdrawals are tax-free.
The upside is that when you take out money in retirement, you’ll reap more dollars on an after-tax basis than a traditional 401(k). For example, if you need to withdraw $48,000 each year, or $4,000 a month, from your Roth 401(k), the total size of the withdrawal will be just $48,000 because none of the income is taxable. In contrast, if you’re in the 22% tax bracket, you’d need to pull out $61,538 from a traditional 401(k) to net $48,000, or $13,538 more than your Roth distribution. Over a 10-year period, you’d be able to shield $135,000 of your retirement savings balance if your money is in a Roth.
“Millennials have a great chance right now to take advantage of (low tax rates),” said Smith.
One in five millennials is doing just that, as 19.5% say they are contributing to a Roth 401(k), above the 18% of all 401(k) savers, according to Fidelity. Many millennials are saving more, too. Fidelity reports that 11.2% of millennials increased their 401(k) contribution rates in the final three months of 2025.
Millennials with high-deductible health savings plans at work can also take advantage of low tax rates by signing up for a health savings account (HSA). This type of health plan is triple-tax advantaged, as contributions are tax-deductible, your money grows tax-free, and withdrawals are tax-free, too.
Building a financial plan that grows your money while keeping taxes low is a winning formula. “It’s not always about the biggest account balance; it’s about having an optimized and tax-efficient plan in the years ahead,” said Smith.
Employ a savings bucket strategy. Millennials can boost their odds of a successful retirement by using the so-called savings bucket strategy, Smith says. That means separating your money into accounts that provide money you need “now” (to pay the bills), money you need “soon” (to pay for a new car, your kid’s braces, or college tuition) and money you’ll need “later” (to fund your retirement).
- Fill the “now” bucket with liquid, cash-like investments that you can tap easily.
- Fill the “soon” bucket with a taxable brokerage account that lets you benefit from the lower long-term capital gains rates (which range from 0% to 20%).
- Finally, fill the “later” bucket with tax-advantaged retirement accounts like 401(k)s.
And if you’re participating in a workplace retirement plan, make sure you contribute enough to get your employer match so you don’t leave any money on the table.
Don’t treat your 401(k) like a piggy bank. It’s harder to grow your wealth if you’re raiding your 401(k) from time to time to meet some type of financial obligation. Two of 10 (19.7%) Millennials currently have an outstanding 401(k) loan, according to Fidelity’s fourth-quarter 2025 retirement analysis.
While borrowing money from your 401(k) can help ease short-term cash-flow problems, it hurts your retirement account in the long run in a number of ways. The money you withdraw loses its ability to benefit from market gains. The money you use to pay back the loan will be in after-tax dollars, and those dollars will be taxed again when you take withdrawals in retirement. Another downside of borrowing from your 401(k) is that if you lose your job or switch jobs, you may be forced to pay back the outstanding loan balance within 60 days.
“That long-term savings bucket is not something that we necessarily want to access ahead of time,” said Smith.
Millennials savings tip: put your 401(k) on auto-pilot
The more you automate your retirement savings, the better. The beauty of a 401(k) is that money comes directly out of your paycheck every pay period and goes straight into your 401(k). But since not every plumber, advertising salesperson, or computer programmer is fluent in finance, investing in a professionally managed target-date fund that determines the assets you own, and how much of each asset, such as stocks and bonds, you own, and rebalances your account for you as you get closer to retirement, is the way to go, says Lee.
“These funds help you achieve more of an auto-pilot experience,” says Lee. “(Saving for retirement) doesn’t become as heavy of a lift.”
At the end of 2025, 70.2% of Millennials had all of their savings in a target-date fund, according to Fidelity.