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While personal loans can provide much-needed financial assistance, it’s important to be aware of potential scams that lead to financial loss and identity theft.

Unscrupulous lenders can hook you in by offering a loan with seemingly good terms when, in fact, you could be charged exorbitantly high interest rates and hidden fees. Scam artists, on the other hand, might take upfront fees and/or your personal information and then disappear without ever giving you a loan.

You can protect yourself, however, by understanding common personal loan scams and knowing how to identify legitimate lenders. Here’s what you need to know.

What Are Examples of Personal Loan Scams?

There are a few types of personal loan frauds that crop up with some regularity. These include debt consolidation scams, no-credit-check-loan scams, and loan fees scams. Here’s a closer look.

Debt Consolidation Scams

Debt consolidation is a legitimate way to pay off debt. It entails taking out a new loan (ideally with better rates or terms) and using it to pay off other existing loans or credit cards. There are many legitimate debt consolidation companies that can help individuals pay down their debt. And then there are scammers.

Scammers may offer debt consolidation loans that promise to lower your monthly payments and interest rates. However, they often charge high upfront fees and fail to provide the promised services, leaving you in a worse financial situation.

No-Credit-Check Loan Scams

No-credit-check loan scams target borrowers with a poor or limited credit history. There are legitimate lenders that consider factors other than your credit score, but they are likely to do at least a soft pull on your credit score (which will not affect it).

Scammers, on the other hand, often promise funds without any kind of credit check. They may ask for fees and personal information upfront and then disappear. Or, they might provide a loan but charge exorbitant interest rates.

Loan Fee Scams

Scammers may request upfront fees for processing or guaranteeing a loan. Generally, you should never pay anything upfront — it’s highly likely that your money will disappear, and you will not receive a loan. Legitimate lenders typically deduct any fees from the loan amount.

How Do I Know If I’m Being Scammed for a Loan?

Identifying loan scams requires vigilance and attention to detail. Here are 12 warning signs to look out for.

1. Phone Offers

If you receive a phone call offering you a guaranteed personal loan or unusually low interest rate, it’s most likely a scam. Reputable lenders do not cold-call potential customers. It is illegal, in fact, to make loan offers over the phone. You ‘ll want to look for lenders that advertise through traditional online and mass media.

2. Upfront Fees

While some upfront fees are charged by legitimate lenders, such as origination fees, these fees are usually deducted from the loan amount before the borrower receives the funds and only after the loan is approved. Be wary of any lender that asks for payments before providing the loan funds.

3. Wire Transfers

Scammers will often request loan payments via wire transfer. Legitimate lenders, on the other hand, typically accept payments through recognized and secure channels, such as automatic debit, online payments, or mailing a check to the lender. If you wire funds, there is no way to recover them.

4. Credit History

Be wary of lenders who claim to offer loans without checking your credit history. Trustworthy lenders typically base their loan terms on your ability to repay the loan. This involves looking at your credit, sometimes getting reports from all three major consumer credit bureaus (Equifax®, TransUnion®, and Experian®).

5. Copycat Name

Online loan scammers may use a business name or website that seems genuine. They may copy a well-known logo and website to trick you. Be sure to verify the lender’s identity by conducting thorough research online, including a lender search by name with both the Better Business Bureau (BBB) and the Consumer Finance Protection Bureau (CFPB).

6. Personal Information

Scammers will often try to get your bank account details, passwords, Social Security number, and other personal information in order to drain your checking account and/or run up charges on your credit card.

If they have enough of your personal information, they may even be able to take out loans or obtain credit cards in your name. Always check if a lender is legitimate before giving them any of your personal information.

Recommended: How to Report Identity Theft

7. State Registration

A lender or loan broker must register in the states where they do business. One way to vet a lender is to go to their website and make sure it lists the states where the company can legally conduct business. If you don’t see a list of registered states, it’s a sign the company is fraudulent.

If they do list states, it’s a good idea to verify the information with your state regulator or attorney general.

8. Reviews

It can be helpful to research the lender online and read reviews from previous customers. Genuine lenders will have positive reviews and a good reputation. You can also check the BBB’s website to see if there are complaints connected with its business profile. The BBB also has a Scam Tracker that is worth checking as well.

9. Customer Service

Reputable lenders that offer personal loans generally have phone numbers you can call and speak with a live person, rather than a chatbot. It’s a good idea to call the lender’s published customer service number, ask questions, and gauge their responsiveness and professionalism. Legitimate lenders prioritize customer service.

10. Hidden Fees

Some legitimate lenders do not disclose their fees on their website; however, they are required to be transparent about fees and terms when they give you a loan offer. Be sure to carefully review loan documents for hidden fees or terms that differ from what was initially discussed.

11. Prepaid Credit Card

Scammers often request payment via prepaid credit cards. Legitimate lenders typically accept payments through secure methods, such as bank transfers or online payment platforms.

12. No Physical Address

Trustworthy lenders have physical office addresses. Be cautious if the lender only provides a PO Box or has no physical presence. If they provide an address, it’s a good idea to look it up on Google Maps or other mapping software. If their address is suspect, their services most likely will be too.

What to Do If You Are Scammed

If you believe you have fallen victim to a personal loan scam, you’ll want to take the following steps.

1. Gather Documents

Compile all relevant documents, including loan agreements, payment receipts, and communication with the scammer.

2. Contact Authorities

It’s a good idea to contact your local law enforcement — by filling out a police report, you’ll have an official record.

It’s also wise to contact agencies specializing in oversight, including your state attorney general’s office, the Federal Bureau of Investigation (FBI), the Federal Trade Commission (FTC), and the BBB. When they have your information, these agencies can better serve and protect other consumers.

3. Contact Your Bank and Creditors

You’ll want to notify your bank and credit card company about the scam. They can advise you on necessary steps to protect your accounts and finances.

4. Set Up Fraud Alerts

You may want to contact one of the three credit bureaus, Experian, TransUnion, and Equifax, and ask them to place a fraud alert on your credit report. This notifies lenders that you’ve been a victim of fraud so they can take extra measures to verify your identity when they get an application for credit in your name. You only need to contact one bureau — that bureau will contact the other two automatically.

Signs of a Legitimate Loan Company

You can be assured that a company is a legitimate lender by doing your due diligence. Here are key things to look for.

Valid Contact Information

Legitimate lenders have valid contact information, including a physical address and a working phone number.

Registered

You’ll want to make sure the lender is registered and authorized to operate in your state. You can check with your state’s regulator or attorney general.

Better Business Bureau

It’s wise to verify the lender’s rating and accreditation with the BBB. A good rating and positive customer reviews indicate legitimacy.

Good Reviews

Be sure to read verified reviews from previous customers to get a sense of their experiences. Legitimate lenders will have positive reviews and a good reputation.

Get a Legitimate Personal Loan

To secure a legitimate personal loan, follow these guidelines:

•  Research potential lenders thoroughly.

•  Compare loan offers and interest rates from multiple reputable lenders.

•  Read loan agreements carefully, ensuring you understand all terms and fees.

•  Ask questions and seek clarification before signing any contracts.

•  Protect your personal information and be cautious about sharing it with a lender you’re unsure about.

Recommended: Personal Loan Calculator

The Takeaway

You can protect yourself from personal loan scams by familiarizing yourself with common tactics and knowing how to identify legitimate lenders. Remember to thoroughly research lenders, review loan terms carefully, and never provide personal or financial information without verifying the lender’s legitimacy.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What are some examples of personal loan scams?

There are several examples of personal loan scams to be aware of: Advance fee scams, which involve asking for upfront fees before the scammer disappears; guaranteed approval scams, which steal upfront fees and personal information; identity theft scams, in which scammers pose as legitimate lenders and steal sensitive personal details; and phishing scams, which make use of fraudulent emails or text messages.

How do I know if I’m being scammed for a loan?

Some signs that you may be being scammed for a loan include upfront fees (legitimate lenders deduct fees from the loan amount); unsolicited phone calls or emails offering guaranteed loans or unusually low-interest rates; requests for loan payments via wire transfer or prepaid debit cards; and “no credit check” loans. Also check for negative reviews online.

What do I do if I get scammed?

As soon as you suspect that you have been scammed, consider these steps: Gather all relevant documents, including loan agreements, payment receipts, and communication with the scammer; then report the scam to your local law enforcement agency and provide them with all the information you have gathered, as well as informing your bank and credit card company. Also be sure to monitor accounts and set up fraud alerts to protect your identity and credit.

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Photo credit: iStock/Moyo Studio

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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Rental scams are an all too common occurrence, costing would-be renters an estimated $12.5 billion in 2024 alone. In today’s competitive rental market, prospective tenants can be eager to sign a lease and may ignore warning signs. While scams take many different forms, any of them aim to deprive innocent victims of their money.^[1]

If you’re in the market for a new place to live, learn how to spot the signs of a rental scam.

Common Types of Rental Scams

Rental fraud can be hard to spot as common scams may use sophisticated approaches to target their victims. The people behind the scam count on renters not catching on until it’s too late and their money is gone. They also leverage the fact that the housing market can be highly competitive and many people rely on technology (such as video tours) to review options vs. turning up in person.

Here are some of the most common rental scams making the rounds. It’s worth knowing that while these scams occur on year-round leases, many are also perpetrated on short-term rentals, such as those for vacation homes or off-campus student housing.

The “Phantom” Rental: Fake Listings

Phantom rentals involve a property that doesn’t actually exist. Fake listings can look like the real thing, complete with photos and detailed descriptions of the property. As convincing as these listings may look, the property is actually made up.

This type of scam works by encouraging people to rent the property without seeing it in person. Scammers may offer excuses as to why they can’t show it to you (say, business travel or a family medical emergency), or pressure you to pay the deposit and first month’s rent to get the keys. Once you hand over the money, the scammer disappears.^[2]

The “Hijacked” Ad: Real Listings, Fake Contact

Some scammers commit rental fraud using real listings for homes, apartments, or other properties.

They’ll find a property that looks promising, copy the photos and descriptions, and use them to create a new listing. You contact the number in the listing expecting to talk to a legitimate rental agent, but you’re really talking to the scammer. Based on images and videos, you pay a deposit in good faith to the scammer, who pockets your money.^[2]

The “Bait and Switch”: Property Isn’t as Advertised

Bait and switch is a deceptive marketing tactic in which one thing is advertised but something entirely different is delivered.^[3]

With these types of rental scams, you may be wowed by photos of the property or a detailed description. You go to check it out, or even sign a lease sight unseen, only to find out that what you’re paying for and what you expected to get are two different things. The actual property doesn’t match with what you believed you were renting.

The “Payment Redirect”: Impersonating a Landlord

Some scammers will go as far as pretending to be the property’s owner to deceive people into signing fraudulent rental agreements. They may even be able to clone the landlord’s email address or payment portal to cheat people out of their money.

The most persuasive scammers convince their victims to send payment for a deposit or rent to them, without verifying that they are who they say they are. Payment redirect scams may involve multiple people working together to facilitate fraud.^[4]

How to Spot a Potential Rental Scam (Red Flags)

Some rental scams may be more obvious than others. If you want to know how to avoid rental scams, you first need to know how to recognize them. Here are some of the biggest red flags to watch out for.

The Listing Is “Too Good to Be True”

You may have a checklist of must-have and nice-to-have features that you’re looking for in a rental. If you find a listing that seems to have it all, including lower than expected rent and deposit requirements, that could hint at a scam, especially in today’s tight rental market.

Here’s a simple way to evaluate a seemingly perfect property: Compare it to similar rentals in the same market. Rental listings for a specific area often have similarities in terms of their size, features, and price. You might think you’ve hit the jackpot if you find the one outlier that surpasses the competition in every way but you may be walking into a scam.

Recommended: Cost of Living by State

Communication and Pressure Tactics

Scammers may want to close a deal with you quickly so that you don’t have a chance to spot their rental fraud. That’s where high-pressure tactics come in.

For example, the person posing as a landlord or rental agent may bombard you with calls, emails, or texts telling you that you need to jump on the property before they hand it over to someone else. Or, they may offer you a special “discount” to motivate you to hand over a deposit and first month’s rent.

If a rental situation makes you feel uncomfortable, don’t be afraid to walk away. You could be saving yourself the headache of cleaning up the mess from a scam.

Suspicious Payment Requests

Typically when you rent a place, the property owner or rental manager will ask you to pay by check, credit card, or debit card. Scammers, however, may ask for more unusual forms of payment, including:

They may also pressure you into paying upfront before you sign a lease or even see the property. Or scammers may tell you there are added fees you’ll need to pay on top of your deposit.

Lack of a Proper Screening Process

Legitimate rental agreements usually require some prescreening before you can be approved. For example, you may need to undergo a credit check or a criminal background check. You might also need to provide references from previous landlords or people you know professionally.

Lack of screening is often a giveaway that a rental opportunity is a scam. Any reputable property owner or rental agent will want to know a little bit about the person they plan to rent to.

Recommended: How Much Money Should I Spend on Rent?

Proactive Steps to Avoid Getting Scammed

Knowing how to avoid rental scams is a good thing if you don’t plan to buy a property any time soon. Here’s how to check if a rental property is legit as you look for a place to call home.

Do Your Homework: Verify Everything

A little due diligence can go a long way in avoiding rental scams. Before you hand over money or sign a lease, take time to confirm that everything is as it should be.

Asking questions can help you root out a potential scam. If the person you plan to rent from is hesitant to answer your questions, ignores them, or gets angry with you, that could signal that you’re dealing with a scammer.

The In-Person or Live Video Tour

Seeing a rental in person can clue you in to a scam if the property doesn’t match the photos or description listed online. It’s also a chance to decide if the place fits your needs, and get a feel for the neighborhood.

Ask for a live video tour if a property owner or rental agent is reluctant to let you visit or your schedule doesn’t allow you time to visit. If that request is also turned down, then you may be dealing with a scammer.

Research the Landlord and Property Ownership

If you’re worried about imposter scams, do your research on the property and its owner or owners. For instance, you should know whether you’re dealing with an individual owner, or a rental property company. Here are some other tips for researching ownership.

If people in the neighborhood seem willing to chat, ask them what they know about the property and its owner(s). People who live in the area may be the best source of information about what a rental is like and whether it’s legitimate.

The Lease Agreement and Secure Payments

At this stage, you may be ready to sign a lease and pay your deposit if everything else checks out. Before you do, take care of these steps.

Be prepared to walk away from any rental situation that doesn’t feel right.

What to Do If You Suspect or Become a Victim of a Rental Scam

You can do all the right things and still run into a rental scam; sometimes, scammers are just that good. If you think you’ve been scammed or suspect that a scam is afoot, here’s what you can do next.

Immediate Actions to Take

Protecting yourself quickly matters if you believe you’re a victim of rental fraud. Here are some important first steps to take.

The goal is to try to minimize the damage as much as possible. If you gave the scammer your Social Security number, you may also want to freeze your credit reports. Freezing your credit prevents anyone from opening new loans or credit cards in your name.^[6]

Reporting the Scam

Reporting rental scams can protect you financially and potentially help others avoid becoming victims. You can report rental fraud or gain important information from these agencies:

Document each report you make. If there’s any chance of a scammer using your personal information to commit additional fraud, your evidence can help you to defend yourself against collection claims or lawsuits related to identity theft.

Monitor Your Accounts

It’s always a good idea to track your financial accounts for suspicious activity but especially so if you’ve encountered a rental scammer. You can set up alerts for your checking accounts, savings accounts, and credit cards to notify you of new transactions, including purchases, transfers, or withdrawals.

You could also take the additional step of closing your existing bank accounts and opening new ones. You financial institution can likely help you achieve a secure banking experience if you’re in the challenging situation of enduring a rental scam.

The Takeaway

In today’s often highly competitive rental market, scammers may try to take advantage of people with fake listings, impersonation of landlords, and other fraudulent activities. It’s important to protect yourself by being aware of these ploys and proceeding carefully to verify listings and lease opportunities and use secure payment methods when drawing upon your checking account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is the single biggest red flag for a rental scam?

If a rental listing seems too good to be true, that’s often an indication that you’re dealing with a scam. If a property seems unbelievably affordable, that’s often a clue that it’s not legit. Another common sign of a scam is being subjected to high-pressure sales tactics, such as signing a lease and sending payment ASAP, before you’ve done your due diligence.

Are listings on major sites like Zillow or Apartments.com automatically safe?

While major rental listing sites typically have state-of-the-art security features, there are indeed plenty of scammers out there trying to post fake listings, hoping to trick people into paying deposits or other fees. For this reason, it’s always wise to be alert to red flags and learn how to check if a rental property is legit.

Is it normal to pay a rental application fee?

Rental companies and property owners may collect a rental application fee to cover the cost of a credit check or background check. If you’re asked for a fee, get an explanation (preferably in writing) of what it’s for. Beware of fees that seem unusually large or that the rental agent demands you pay, especially via a person-to-person payment app.

What should I do if I live out of state and can’t see the apartment in person?

If you can’t get to a rental in person for a tour, you could ask for a live video tour of the property. Alternatively, you may ask someone you know and trust who lives in the area to visit the property on your behalf. You’ll need to get the property owner or rental agent’s consent for that first.

How can I quickly verify the person I’m talking to is the real owner?

The best way to quickly verify someone’s identity is to meet them in person to discuss a rental property and ask for a government-issued photo ID. Take down their information then compare that to property tax records which can be found online for the property in question.

Article Sources

1. Federal Trade Commission (FTC). Protect yourself (and your money) from scammers this Financial Literacy Month.
2. Federal Trade Commission (FTC). Rental Listing Scams.
3. Cornell Law School. Bait and switch.
4. Office of Inspector General. OIG Fraud Bulletin.
5. Federal Trade Commission (FTC). If You Were Scammed.
6. Consumer Financial Protection Bureau. What does it mean to put a security freeze on my credit report?.

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About the author

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Photo credit: iStock/atakan

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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Millennials and Gen Z have faced some financial hurdles as they’ve entered adulthood, but many are saving for retirement nonetheless — and recognize the importance of doing so. In addition, time is on the side of these younger adults, when it comes to reaching their retirement goals.

That said, retirement planning for these younger adults has been hampered by significant challenges, including employment shifts relating to the pandemic, historically high student debt, the rise of the gig economy, concerns about Social Security, and the prospect of living longer lives. Fortunately, there are a number of strategies Gen Z and Millennials can employ now to make the most of the years ahead, so they can retire with peace of mind.

Who Are Millennials and Gen Z?

Millennials, also known as Gen Y, are the largest generation since the Baby Boomers, and number about 80 million. This cohort was born between 1981 and 1996, and are now between the ages of 29 and 44.

Gen Z refers to those born from about 1997 to 2012; they are roughly between ages 13 and 28. While Gen Z is smaller — about 71 million — they are the first generation to be raised as digital and social media natives. As such they’ve exerted a notable influence on businesses and brands worldwide.

What Might Retirement Look Like for Younger Adults?

When it comes to saving for retirement at different ages, Millennials and Gen Z have faced various financial challenges as they’ve started college and entered their prime working years. Many came of age during a period of escalating student loan debt, greater job uncertainty, concerns about Social Security’s solvency, and more.

When it comes to Millennials and retirement in particular, this group has seen a steeper cost of living since 2020^[1], which has prevented many from taking steps toward marriage and home ownership.

Nonetheless, a 2024 study by the Transamerica Center for Retirement studies has found that 71% of Gen Z and 84% of Millennials are saving for retirement in a company-sponsored plan or an outside account^[2] such as a traditional IRA.

But over half of respondents in each group also admitted they don’t have enough income to save for a secure retirement, and the amount of debt they carry is interfering with their ability to save.

Luckily, most members of the Millennial and Gen Z generations have years to adopt new habits and strategies in order to secure the future.

5 Retirement Challenges Millennials and Gen Z Face

In order to take the reins of their retirement, younger adults would do well to understand how various economic and world events have impacted their financial lives thus far.

1. Student Loan Debt

Student debt continues to be a burden for many. Thanks to higher interest rates and the rising cost of higher education, tens of millions of Millennials and Gen Z have accrued steep student loan debts.

When looking at student loan debt by generation, Millennials represent nearly 40% of all student loan borrowers, and some 18.5 million have outstanding balances. The average amount they owed as of 2024 was $40,438.^[3]

Gen Z represents the second-largest group of borrowers, at 28.2%. Of these, 13.1 million have outstanding debt. Members of Gen Z have the lowest balance on average: about $23,000 as of 2024. But with millions of this cohort still in college, their loan balances are growing faster than any other group: 6.72% compounded annually.^[3]

For many younger adults, planning for a secure future will require a debt-management strategy as well.

2. The Gig Economy

In addition to contending with student loan payments, Millennials and Gen Z have been impacted by a shift from traditional employment models to a more flexible, less structured gig economy. The growth of digital platforms in the last 15 years has accelerated this change, allowing companies to hire freelance workers for shorter-term services in companies like Uber, Fiverr, Postmates, TaskRabbit, Airbnb and many others.

The expansion of the gig economy, however, has made it harder for some younger adults to earn and save in retirement plans such as an employer-sponsored 401(k). More than 54% of Millennials have less than $10,000 saved for retirement, according to a 2023 survey by GoBankingRates.^[4]

That said, there are many retirement plan options for the self-employed, and gig workers can save as much or more in a SEP-IRA, for example, as in a 401(k).

3. Decline of Pensions and Rise of 401(k) Plans

The lack of retirement savings may be exacerbated by a broader trend in retirement planning in the last 25 years: the disappearance of pensions and the rise of worker-funded plans such as 401(k) and 403(b) plans.

In 2000, about 50% of private-sector workers had access to a pension plan^[5], a benefit that provides retirement income for life, and sometimes health benefits as well. In 2024, however, only 19% of private-sector employees had a pension. (Government workers generally still get a pension.)

Defined-contribution plans, like 401(k) plans, have largely replaced pensions for most workers today. While these employer-sponsored plans are typically tax deferred, and offer a potential tax break when you contribute to them, they don’t offer the security of lifetime pension income.

Again, this reality will impact Gen Z and Millennials’ retirement, and it adds to the necessity of planning ahead for a steady income.

4. Social Security Funding

In addition to the above, Millennials and Gen Z have been facing growing concerns about the viability of the Social Security system, and questions about whether future retirees will get their full benefits.

The Social Security system is funded by employer and employee contributions, which are withheld from workers’ paychecks. However, there are demographic changes that are partly impacting the solvency of Social Security. People are living longer, and these additional outflows have been putting a strain on the Social Security Trust Funds (the main pool of assets).^[6]

In addition, the government itself has borrowed from the Trust Funds by issuing debt securities to itself, which act as intergovernmental IOUs, in effect.

While many policymakers believe that Congress will support the changes necessary to fix the system (e.g., increasing payroll taxes or repaying the borrowed funds), these issues have yet to be resolved. And the message from the Social Security Administration to current workers is not fully reassuring: Benefits will exist, but as of 2035 they might be only 78% of what a worker would have gotten before.

Therefore, Millennials and Gen Z may be in the position of having to cover more of their retirement income with savings.

5. Longevity

The other big factor that will impact Gen Z and Millennials’ retirement is longevity. Thanks to advances in health care and technology, millions of people are already living longer, healthier lives.

In 2022, the number of Americans ages 65 and older was 58 million. By 2025, the number of people 65 and up is projected to reach 82 million by 2050, according to the Population Reference Bureau.

While no one can predict one’s actual lifespan, Millennials and Gen Z will have to factor in the need to save more, to cover potentially much longer lives. This is especially important for women, who live about five years longer than men on average. The average lifespan at birth is 74.8 years for men, 80.2 years for women, according to the Centers for Disease Control.

Another factor that Millennials and Gen Z may face in the coming years is the cost of caregiving for older loved ones. Some 37% of workers today are caring for, or have cared for a relative or friend (separate from parenting roles), according to the Transamerica study.

Taken as a whole, longevity factors are likely to have a bigger impact on these younger adults than on previous generations.

Tips to Help Build a Secure Retirement

Fortunately, Millennials and Gen Z represent the youngest adults — with many years ahead to work, save, and strategize about their retirement years. These tips will help.

Investing Strategies

When it comes to retirement planning, having a solid investment strategy can help by adding potential increases to one’s savings.

Obviously there are countless types of investments to consider. For those who are interested in active investing, learning about stock market basics is key.

Next, it’s important to think about how your asset allocation can change by age. The younger you are, the more time you have to take on risk — and potential growth — while still having enough runway to recover in the event of a downturn.

That said, DIY investing is not for everyone, and in that case younger investors have other options that are less hands-on.

Most target funds, sometimes called lifecycle funds, have names that include a date: e.g. ABC Retirement Fund 2045.

The fund’s portfolio starts out with a more aggressive asset allocation, or mix of assets, and adjusts over the years to become more conservative. By starting out with a more aggressive, equity-based allocation and gradually becoming focused on less risky investments over time, the fund’s portfolio may be able to deliver returns while minimizing risk.

While robo accounts are also designed to be hands-off, the mix of assets (a.k.a. the asset allocation) doesn’t adjust over time as it does with a target-date fund. That said, robo advisors can be cheaper because these portfolios are constructed with low-cost exchange-traded funds (ETFs).

Reducing Debt

The true challenge facing many younger adults today is that so many have the need to balance debt repayment with saving. While there are no easy answers when juggling competing financial priorities, the reality is that having a clear-cut debt repayment plan can only help support retirement savings.

Fortunately, there are a number of smart get-out-debt strategies to consider.

Maximizing Savings

Perhaps the most important step younger adults can take toward a secure retirement is saving money in an actual retirement plan. While it’s true that putting money in a savings account may seem simpler, these offer very little growth and no tax advantages.

By contrast, saving and investing with a traditional or Roth IRA account, or a workplace account like a 401(k) plan, can help your savings increase over time. And depending on the type of account you choose, you can reap tax benefits.

The rules governing IRAs are quite specific, so be sure to learn the terms. For example, the total you can contribute (deposit) in an IRA is $7,000 for tax year 2025, or $8,000 if you’re 50 and older.

Unlike IRA accounts, however, the annual limits for employer accounts are much higher. With a 401(k), you can save up to $23,500 per year for tax year 2025. People 50 and older can contribute an additional $7,500 in 2025. An additional “super catch-up” limit of $11,250 applies to individuals ages 60 to 63.

If your job offers a retirement account, this is often the best way to maximize your savings.

Again, all retirement accounts are subject to government and tax regulations, so it’s important to understand the terms when choosing a retirement account.

Alternative Retirement Options

When thinking about retirement, Millennials and Gen Z also have alternatives beyond simply retiring. Thanks to advances in medicine and technology, it may be possible to work longer (and save more).

Retirement itself could be reinvented, as people develop ways to be productive and enjoy life in the decades after traditional 21st-century “retirement age.”

In addition, there is a trend toward communal or shared living, with mixed ages, that could offer alternatives to long-term care and nursing home facilities.

One thing is certain, as Millennials and Gen Z think about their retirement, they will likely bring their own innovations, as generations have in the past.

The Takeaway

While Millennials and Gen Z have faced certain challenges when it comes to building up their retirement savings, they have some advantages as well. The majority of these younger adults are already saving in retirement accounts. And while some are concerned about how much they can save — time is on their side.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What age should Millennials and Gen Z start saving for retirement?

Anyone with earned income can start saving for retirement at any age using an IRA account. Otherwise, the general rule of thumb is: the sooner you start saving the better, because time tends to help money to increase.

How much will Millennials need to retire?

There are various formulas for deciding how much you need to retire. One target is to aim for 10 times your income by age 67, which is the current age when you can get your full benefits from Social Security.

Will Social Security be gone for Millennials?

That’s highly unlikely. Social Security has been in place for 90 years, and it will continue to exist for future generations. That said, the formulas used to calculate benefit amounts may change, and it’s possible that people will get a lower benefit amount, given current trends.

Article Sources

1. Federal Reserve Bank of St. Louis. Consumer Price Index for All Urban Consumers: All Items in U.S. City Average.
2. Transamerica Institute. The Multigenerational Workforce: Life, Work, & Retirement.
3. Education Data Initiative. Student Loan Debt by Generation.
4. Nasdaq. Most Millennials Have Less Than $100K in Retirement Savings: Should You Be Concerned?.
5. Economic Policy Institute. Retirement made riskier.
6. Social Security Administration. What young workers should know about Social Security and saving.

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Photo Credit: iStock/MDV Edwards

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