Personal Finance

Millennials: Ask These 3 Questions Before Envisioning Your Dream Retirement

Maurie Backman

Published: February 25, 2025 12:41 pm

If you’re a millennial, it means that barring an early workforce exit, retirement is probably quite a ways off. But that doesn’t mean you shouldn’t start planning for it now.

The reality is that it’s never too soon to start thinking about retirement. And the better you plan, the more rewarding that period of life might be. With that in mind, here are three questions all millennials should be asking about retirement now.

1. How will I ensure that my savings keep up with inflation?

Millennials, along with Americans on a whole, have just lived through a years-long ago period of rampant inflation. But the reality is that even during periods when inflation isn’t as high, it’s still a threat to your retirement security.

Inflation has the potential to erode the value of your savings over time so that $1 today won’t have the same buying power down the line. That’s why it’s important to not only save money for retirement, but invest your money in a manner that’s likely to keep up with and outpace inflation.

When you’re in the process of building wealth for retirement, it makes sense to focus on stocks. Once you’re actually retired, a combination of stocks and more stable assets makes sense. But those stable assets should, ideally, be ones that continue to produce income for you.

If you’re not sure how to put together an inflation-beating portfolio for retirement, consult a financial advisor. They can help you assemble an asset mix that protects you from falling behind.

2. How much money will Social Security give me?

A lot of retired Americans today are in a financial jam because they missed the boat on savings and rely mostly on Social Security to make ends meet. That’s not a situation you want to be in. So it’s important to have realistic expectations for Social Security.

One thing you should know is that if you earn a typical paycheck, Social Security will replace about 40% of it once you retire — provided that benefits aren’t cut. But it’s too soon to know if that will happen.

Social Security is facing a funding shortfall. And because of it, the program might have to cut benefits in roughly a decade’s time. So there are a lot of variables at play.

Your best bet, therefore, is to assume that you’ll only get a portion of your retirement income from Social Security, and aim to save the rest. You can do so by funding an IRA, 401(k), taxable brokerage account, and any other account whose funds you can tap during your senior years.

3. What will my healthcare costs amount to?

Fidelity’s latest estimates show that a 65-year-old retiring in 2024 will spend an average of $165,000 on healthcare throughout retirement. But remember, that number applies to retirees today. As a millennial, you could be looking at even higher costs, since healthcare inflation tends to outpace general inflation.

For this reason, it’s important to make sure your retirement savings plan has room for healthcare costs in it. It’s also a good idea to max out an HSA if your health insurance plan allows you to contribute to one.

And don’t just max out — plan on leaving that money alone until retirement. Although you can tap an HSA to cover qualified healthcare expenses at any time, you’re better off reserving that money for retirement, when you may be on more of a budget.

Also, the nice thing about HSAs is that you’re allowed to invest the money you don’t need right away, and that gains in your account are tax-free. So you might as well milk those for a good couple of decades if you have the option to.