When it comes to saving for retirement, millennials have time on their side, but according to a Fidelity survey, they're drastically under-saving for their golden years. That's scary, because every dollar that gets saved early on in a career can have a big impact on financial security in retirement. Are you saving more or less than the average millennial?

Socking it away

I won't keep you in suspense: The average millennial is saving 7.5% of his or her salary for retirement, according to Fidelity. That's not bad. But it may not be enough for millennials to live the type of retirement they want.

A millennial man in a business suit with arms raised as money falls from the sky around him.


To reduce the risk of outliving your money, financial advisors recommend withdrawing no more than 4% of your savings per year in retirement, and that suggests millennials might need to sock away $1 million or more if they want to live comfortably. Unfortunately, many millennials will fall far short of that goal.

Becoming a millennial millionaire

Shy of launching the next big start-up, consistently saving in the right mix of investments for your age is the single best way to end up with a seven-figure account -- and the bragging rights that come with it.

If you're saving anywhere near (or below!) the average millennial, the single best thing you can do to get yourself going in the right direction is to increase your contribution rate to 10% or, even better, 15% of your salary. That may sound daunting, but you don't have to increase your contribution percentage all at once. If you increase your rate by a little every year, you can still reach that target without busting your budget.

It's also important to pick the right mix of stocks to own in your portfolio for your age. For instance, if you're in your 20s or 30s, owning a lot of fixed-income investments, such as bonds, could mean that you're not benefiting as much from compound interest as you should be.

Too few millennials appear to be taking this advice. Fidelity says that over the past year, the average contribution rate to retirement accounts among millennials hasn't budged, and only 55% of investors own age-appropriate investments.

That's a shame, because making those changes now can pay off big.

For example, Sam's a 35-year old millennial earning $50,000 per year with a 7.5% contribution rate, $40,000 in retirement savings, and a portfolio mix that's relatively conservative. If Sam leaves his contribution rate unchanged, earns 3% pay raises annually, and averages a 3% annual return over the next 30 years, his portfolio would be worth $366,493 at age 65.

That's not bad, but let's see what happens if Sam were to increase his contribution rate to 15% and shift his portfolio mix toward investments that could earn him an average return of 6% per year instead. In that scenario, Sam's nest egg could grow to $1,085,501 at 65. Welcome to the millionaire's club, Sam!

A millennial woman smiles while raising two thumbs up.


One more thing

After a big rally in the stock market since the Great Recession, it wouldn't be too surprising if stocks give up some of their gains at some point. When that happens, it can pay off to resist the temptation to change your retirement strategy. Historically, contributing consistently to investments through both good and bad times has provided investors with the best chance for long-term financial security.