The statistics are disturbing: older Millennials – those born in the early 1980s – will need to stash approximately $1.8 million for their retirement, and younger Millennials – those born in the 1990s – will need more than $2.5 million. That’s not the disturbing part, however. The most distressing statistic is that currently 57% of the Millennial generation hasn’t even begun to think about saving for retirement.
Entrepreneur John Rampton cites these and other statistics in his October 2016 article in Inc.com. He notes that although Millennials believe they will have a better retirement than past generations, they are overlooking a couple of key facts. First, they are expected to live longer than previous generations. That’s more retirement years to plan for than past generations needed to worry about. And second, Millennials are expected to have fewer Social Security benefits, and unlike their grandparents, most will not be collecting generous pensions. The era of remaining with the same company for decades (or even in the same profession) has passed, and while that represents a wide variety of career choices for today’s workers, it doesn’t guarantee a secure future.
The good news is that there are several simple strategies that Millennials can begin implementing today to ensure wellbeing in their golden years.
Start Saving Now
If the idea of saving feels like deprivation, it’s time to gain a new perspective. Saving is YOU paying your future self. Chuck Saletta from Motley Fool points out that if a 21 year-old puts away a meager $173 per month with a 10% annual return, they would earn approximately $2M by the time they reach retirement age. Investing is a good way to ensure that 10% annual return. Although the stock market can be volatile, and there are no guarantees, Millennials have the best resource on their side: time. Investing, despite losses and gains, will eventually yield a significant increase in wealth. Finding and working with a good wealth planning professional is the least painful way to accomplish this goal.
Automating monthly savings makes the process effortless, as well as virtually unnoticeable. Setting a specific savings amount to be withdrawn from your paycheck and deposited into your 401(k) or savings account relieves the need for self-discipline, and eliminates the resulting guilt if you fail to make the deposit.
As a bonus, many employers will match your 401(k) deposit. Saletta explains that typically the “match is $0.50 for every dollar you contribute, up to a percentage of your salary.” That’s FREE money.
Decide to be Debt-Free
Financial experts know that the best way to become wealthy is to stay out of debt. Concentrate on paying off student loans and credit card debt before beginning to save for retirement. Sound counterintuitive? It’s not. Paying off high-interest or long term debt avoids thousands of extra dollars spent on interest fees. Need help figuring out how to pay it off or developing the discipline to make it happen? Check with your local Achieva branch to speak with a Certified Financial Counselor. They offer free sessions for members where you can work with a counselor to structure a payment plan based on your personal situation. Prefer a less structured approach? Check out Financial Peace University, a Christian-based program developed by financial professional Dave Ramsey. His 8-week course will not only explain the why, but will also give you tools for the how – all delivered with a hefty dose of humor that makes the process fun. Local churches often sponsor FPU programs, and these “live” sessions come with a small group discussion component, where participants share their stories and tips with one another.
Living within your means is one of the best ways to remain debt-free. That does not mean living a life of sacrifice. What it means is avoiding the purchase of items that you don’t need, such as impractical luxury vehicles. If you need a luxury car (say, for business) do your homework, and don’t pay full price. That rule applies across the board – use coupons (again, FREE money) and shop at more affordable stores. Nordstrom may offer designer fashions, but Target’s collaboration/capsule collections offer high style at a much lower price point.
Multiple Income Streams
One of the easiest ways to reach your savings goals faster is to have multiple income streams. Have a spare room? Bring in a renter. Pick up a second job as a driver for Uber or Lyft. If you are an artist or crafter you could pick up extra cash selling items on Etsy. Think outside the day-job box and figure out how to turn your talents or interests into a paying proposition. You may end up starting your own home-based business.
When you are young (and broke) the idea of retiring as a multi-millionaire seems unattainable. But following even a couple of these tips can catapult you much farther ahead than you could achieve without a plan. Anything you do now makes it much easier later. And in the long run – which is what it’s all about – you will look back and thank your younger self for having the vision to create a generous retirement.