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To retire at 65, millennials will need to save nearly half of their paycheck

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If you think the standard recommendation of putting 15% of your paycheck toward retirement is impossible to achieve, get ready for an even bigger hurdle. At least one retirement expert thinks that number should be much higher.

Millennials should aim to set aside nearly half of their income for the future, according to Olivia S. Mitchell, professor of insurance/risk management and business economics & public policy, and executive director of Wharton's Pension Research Council at the University of Pennsylvania. If you want to live off even half of your final salary in retirement, you need to save 40% of your income over the next 30 years, she says.

That calculation, which is based on academic research from an MIT economist, takes into account a few assumptions. The biggest is that you want to retire at 65. That's not much of a stretch: About a third of millennials say they expect to retire between the ages of 65 and 69, according to a recent T. Rowe Price survey. However, 43% of millennials say they actually expect to retire earlier.

Yet about half of millennials are planning to contribute less than 6% of their income to a 401(k) this year, the T. Rowe Price survey found. Only about one in five is currently saving more than 15% of their income.

The second major assumption is that investment returns over the next few decades aren't going to match the roughly 10% historical returns Americans have enjoyed previously.

"Most people are not told by financial advisors that their future returns will likely be much lower than in the past, and their future taxes will likely be much higher," Mitchell tells CNBC Make It.

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Other experts agree. The economists at investing giant Vanguard predict that, over the next 10 years, annual U.S. stock market returns will likely average 3% to 5%. When you factor in inflation — which, luckily, Vanguard predicts will be below 2% — the real rate of return is expected to be under 3%.

Morningstar Investment Management predicts an even more meager return: 1.8% over the next 10 years for U.S. stocks, before adjusting for inflation. Meanwhile, perhaps the most pessimistic outlook comes from Boston-based asset management firm GMO, which expects real returns of -3.6% for U.S. large-cap stocks and -1% for small-cap stocks.

It's also worth noting that the 40% retirement savings rate calculation does not take into account Social Security's looming shortfall. If Congress does nothing, the agency's funds will only be able to pay out about 80% by 2035. But many experts are betting that reforms will happen.

If you can't increase your savings, you need to change the math

If saving almost half of your salary is not an option, what can you do to make sure your retirement fund is on track? You need to play with the math you have control over. Market returns may be out of your control, but when you plan to retire is more manageable.

In general, Americans — especially millennials — will need to work longer and claim Social Security later. "Benefits from Social Security are 76% higher if you claim at age 70 versus 62, which can substitute for a lot of extra savings," Mitchell says.

If you're able, don't retire, Mitchell says. "If you can keep working, do so. If you can't work full-time, work part-time. Every little bit helps."

With the current unemployment rate the lowest it's been in decades, Mitchell adds that this is a great time for older folks to get jobs. Of course, it does depend on a potential employee's skill set. People should continue investing in their skills well beyond 45 or 50, she says.

"If you aren't computer trained, or have rusty computer skills, go out and learn the skills and keep sharpening them to be employable," Mitchell says. And don't forget community colleges and other groups that are keen to train you.

In addition to your job skills, you'll also need to maintain your health. Just over a third of Americans are forced into retirement sooner than they'd planned, many because of health setbacks.

The most important thing is to invest in your health when you're young and middle-aged, Mitchell says, adding that a healthy lifestyle includes not smoking or drinking too much and getting a lot of sleep. "Invest in your older self when you're younger," she says.

Beyond simply planning to work longer, Mitchell says more Americans may need to consider purchasing an annuity as they get older. Mitchell has researched and written extensively on annuities, both independently and through collaborations with the Pension Research Council at the Wharton School, which is supported, in part, by the Mutual of America Life Insurance Company and through member contributions from financial firms and insurance companies.

Although these products have been criticized by many experts for their high fees and opaque sales practices, Mitchell says she prefers deferred annuities because they are one of the few products available that take some of the uncertainty out of the equation and provide some protection to those who are living longer. 

"These are true longevity insurance and will help generate a steady income when you're probably not able to work any longer," she says.

Don't miss: A 6-step guide to choosing the right financial professional for you

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