Typically, younger people don’t make retirement savings a priority. Living
expenses, student debt, rent or house payments, and other day-to-day
expenses mean that retirement savings take a back seat. In fact, research
from National Institute on Retirement Security says that 66 percent of
millennials haven’t saved any money for retirement, and 66 percent
haven’t started saving.1 That attitude, however, will make it much more
difficult to have a secure retirement later, according to seasoned
retirement plan advisors.
The main thing that millennials are sacrificing by not saving now is time.
Time allows funds to grow through compounding, and that can turn
relatively modest savings into much larger nest eggs. For example, saving
$50 each month in a retirement account earning 6.5 percent annually and compounded monthly would generate retirement savings
of $226,781 over 50 years. A millennial who starts saving the same amount 30 years later, allowing it to only compound for 20
years, would have only $24,525 at the end of the 20 years.2
And $50 each month isn’t a huge amount, even for a cash-strapped millennial. Some other retirement savings tips include:
• Take full advantage of employer-sponsored retirement plans, like 401(k) or 403(b) plans. Funds contributed to these taxadvantaged
programs grow free of taxes, which means more money stays in the account to generate interest.
• Contribute at least as much as your employer is willing to match. If your employer matches 3 percent of your salary, you
should start by contributing that much.
o Otherwise, you’re “leaving money on the table.” Your employer match instantly increases your contribution, and
your money grows faster.
• Don’t worry about not being an investment expert. Many retirement plans now offer target-date funds (TDFs). Also known
as lifecycle or age-based funds. TDFs automatically adjust your investment assets as you age, so you don’t need to
balance your funds yourself.
One common objection millennials have about contributing to an employer-based retirement fund is that they may not stay with that
employer. Actually, very few people stay with a single employer for their entire careers, and retirement plan funds can be rolled
over into a new employer’s plan or rolled over into an IRA if you leave your job.
1 Millennials Report, NIRS. https://www.nirsonline.org/wp-content/uploads/2018/02/Millennials-Report-1.pdf
2 Simple Savings Calculator, Bankrate. http://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx
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