Millennials who want to live off even half of their final salaries in retirement will need to save 40 percent of their paychecks over the next 30 years, according to an economics expert.

Olivia S. Mitchell, a professor of insurance and risk management as well as business economics and public policy at the University of Pennsylvania, came up with the new amount based on research data. The standard recommendation from most financial companies is for workers to save 15 percent of each paycheck for retirement.

According to a T. Rowe Price survey, only one in five millennials are saving more than 15 percent of their paychecks for retirement.

Mitchell used academic research from an MIT economist to figure out how much millennials would need to save for retirement, CNBC reported. Her 40-percent calculation assumes that most millennials will retire at 65, and that investment returns on retirement plans could be as little as 3 percent, compared to the 10 percent many people are seeing now.

One-third of millennials will retire between the age of 65 and 69, according to the T. Rowe Price survey, and at least 43 percent reported they want to retire earlier.

But the survey also found that almost half of the millennials who participated contribute 6 percent or less of their income to a 401(k) or similar retirement savings plan.


One thing to note is that Mitchell did not take into account that Social Security payments could dwindle for millennials. In April, the Social Security Administration reported that if Congress refuses to act, the retirement fund could be insolvent by 2035.

So what should you do if you can’t save 40 percent of your paycheck? You may need to mess with the math a little and consider retiring at a later age. If you can’t work full time as you get older, even doing a part-time job adds up.