It's not a secret that Americans are woefully behind on retirement savings. Almost half of U.S. households have no independent savings to show for, or so reports the Economic Policy Institute. It's therefore encouraging to hear that younger workers are recognizing the need to ramp up their personal savings game.

According to a new Bank of America Merrill Lynch report, workers aged 25 to 37 expect that 65% of their retirement income will come from their own savings and other personal sources, as opposed to just Social Security. Older generations, meanwhile, continue to be more reliant on those benefits -- and are headed for trouble if they don't change their way of thinking.

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Why millennials have it right

Though Social Security has been around for a long time, the purpose of it isn't to sustain retirees without any other form of income. Rather, Social Security is meant to serve as a supplement to additional income streams -- streams that countless seniors don't, or won't, have.

In a best-case scenario, Social Security will pay the average worker 40% of his or her previous income. Most seniors, however, need at least 80% of their former earnings to pay the bills in retirement, and those with health issues or expensive tastes will inevitably wind up needing more. The fact that younger workers aren't planning to live off Social Security alone means they're being realistic about their independent savings needs. In fact, that 65% figure mentioned above is pretty on-target, assuming Social Security doesn't face sizable cuts in the future. Even so, it's a fair assessment nonetheless, and one that more older workers ought to acknowledge, too.

Younger workers still want financial help

Despite their strong grasp on reality, younger workers still want help managing their finances and planning for the future. In fact, nearly half of millennials are looking for their employers to offer general education on financial matters.

Unfortunately, many workers of all ages have no choice but to take retirement planning into their own hands. If you're intent on saving but looking for guidance, here are few initial tips to follow:

  • Save as much as possible, as early as possible. The key to establishing a sizable nest egg is to start setting money aside early on in your career and use the power of compounding to your advantage. If you begin saving $500 a month at age 35 and retire 30 years later, you'll wind up with $567,000 if your investments bring in an average annual 7% return. Wait just five years to start saving that money, and you'll be looking at only $379,000 instead.
  • Invest aggressively. The way you invest your money can have a serious impact on your savings. Many workers prefer to invest conservatively in order to minimize potential losses, but that approach won't get you very far if your goal is to amass a nest egg that'll sustain you in retirement. We just saw that saving $6,000 a year for 30 years would result in a $567,000 nest egg after applying an average yearly 7% return. But if you invest the same amount and stick to safe investments yielding half that return, you'll retire with just $310,000.
  • Limit your debt. The better a job you do of staying out of debt during your working years, the greater your chances of entering retirement debt-free. And that's crucial because if you want your nest egg to go further, you'll need to make sure you're not throwing money away on debt payments during your senior years. While mortgage debt is often unavoidable, aim to either buy a home by your mid-30s so that you'll have a 30-year loan paid off in time for retirement, or make extra payments toward your mortgage if you sign it later in life. Furthermore, steer clear of credit card debt completely, and avoid taking out student loans for anyone other than yourself.

If your goal is to save enough money to mostly fund your own retirement, then you clearly have your work cut out for you. The good news? If you start early enough, invest wisely, and stay away from debt, you stand a strong chance of retiring comfortably. And if you're one of those people who understands that the bulk of your retirement income will need to come from you, then rest assured that you're already ahead of the game.

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