This Retirement Strategy Could Help Millennials Increase Their Savings

For millennials in their forties, retirement is on the distant horizon. Although the prospect of retirement can seem wonderful, saving enough to do so comfortably can be daunting. Moreover, millennials — those born between 1981 and 1996 — have endured particularly high student loan debt as well as high home prices, stretching their monthly budgets. Perhaps that's why only 42% of millennials were reportedly on track for retirement in 2025, according to Vanguard. If you're a millennial concerned about reaching your retirement goals, delaying retirement altogether can be an effective strategy.

Adding additional working years can give you more time to earn income. Furthermore, you have your peak earnings years to look forward to — typically between 45 and 54 years old, according to ADP. Those extra years of income can boost your retirement fund and make you wealthier than the average millennial, while adding financial security. As an example, compare a 45-year-old millennial retiring at age 62 or working longer and retiring at age 70. If they have $135,000 saved, contribute $7,000 per year, and earn a 6.5% annual rate of return on average then by age 62, they would have $600,252 in total retirement savings, having earned $346,252 in interest. However, by age 70, the total saved would be $1,063,953, having earned a whopping $753,953 in interest. For millennials who feel behind on  their retirement goals, delaying retirement can provide a longer time horizon to earn, save, and invest for a more secure retirement.

Whether you can reasonably afford to retire in your 50s, 60s, or early 70s will likely be driven by the income you earn during your remaining working years, and the strategies you might employ to ensure that money grows. However, keep in mind that extra income from delaying retirement is only one possible strategy for getting retirement-ready.

While working longer can add extra years worth of savings, increasing your savings rate or even maxing out your IRAs or a 401(k) can be one of the best ways to catch up on your retirement savings. In fact, increasing your savings rate by just 1% can make a huge impact. An extra 1% every year until age 67 would mean that a 45-year-old millennial earning $70,000 per year would gets a savings boost of $50,778, while a 35-year-old earning $60,000 would add $109,995.

Moreover, savings that are invested can grow even faster through compounding, which is when you earn interest on both your invested principal and on the interest. This could be why investment returns are a surprising source of net worth for upper-class millennials, per a 2024 Worth Magazine survey.