Retirement may seem so distant that you may not want to think about it. But for millennials, it shouldn’t be thought of as an afterthought because the best money-making asset they have is time.
Millennials, or those born between 1981 and 1996, are not as far from their retirement years as you might think. The oldest Millennials are now over 40 years old. With a full retirement age of 67, they may not be fully on track in terms of saving for retirement, diversifying their investment portfolio, and taking advantage of every advantage they still can. Huh.
What millennials need to know about planning for retirement.
1. Save Now (Even if You Don’t Think You Should)
For something that seems too far-fetched, it’s easy to juggle retirement savings and planning. But the more you save now, the less pressure your future is likely to put on you.
You can do this, via:
- an IRA. If you have nothing else, open an IRA account with a robo-advisor and have your account auto-pay each month. Even $10 or $20 — which seems small — can add up over time. You can use a traditional or Roth IRA — the biggest difference is how you’re taxed. If you think you will retire in a higher tax bracket, a . go with Roth IRA, which takes contributions after tax and leaves you more money in your pocket when you finally start taking deductions. otherwise, go with a traditional iraBut keep in mind that your withdrawal will be taxed when it is time to withdraw.
- a savings account. While dedicated retirement accounts are one of the best ways to boost your wealth, they are not the only way. You can also make incremental contributions to a high-yield savings account. best savings accounts Now offer interest rates above 1 percent, but this fluctuates with market conditions.
- additional income. Get a Bonus? Add it to your savings. Finish paying off debt like car payments or student loans? Add those payments to your investment account. did you pick up side hustle, Use it to pay off debt as quickly as possible and deposit some of it in your retirement accounts. Big contributions are great, but not always possible, especially when you have other obligations right now. Use what you have to make small, smart contributions.
2. Diversify Everything You Can
There is no one way to save for retirement. You can have a work-sponsored 401(k) as well as an IRA. You can have a taxable investment account and a high-yield savings account. The more accounts you have, the more security you are providing to your future.
This is because your money has to be spread across multiple accounts and securities. One of the best ways to keep your investments safe, Avoid putting all your cash in one stock or asset. Instead, find low cost index fundsExchange-traded funds and other investments that spread your money across a variety of assets such as stocks, bonds and real estate.
3. Take Advantage of Employer Benefits
Employer matches vary widely from company to company, but it’s a good idea to ask potential employers to contribute to these plans. The two most popular types of matching are dollar-for-dollar and partial matching. Partial matching is when your employer matches contributions up to a certain amount. You can see that companies match 50 percent of contributions up to 6 percent of salary. Here it looks like this.
Let’s say you make $80,000 a year. If you contribute 6 percent of your salary, or $4,800, your employer will pay $2,400 per year on top of your contribution. For 2022, all employees can contribute up to $20,500, while those age 50 and older can contribute an additional $6,500. And any employer contribution comes on top of these maximum contributions, up to $61,000 per year between the two contributions. This is a big chunk that you can put toward your retirement each year with the help of your employer.
You can also take advantage of other employer benefits, such as if they have a student loan matching program where your employer matches your student loan payments each month, up to a certain dollar amount or percentage. This can help you pay off your debt faster and dedicate more of your money to retirement savings.
4. Create Regular Goals
If you’re in the 40 (or almost 40) club and haven’t given much thought to retirement, you have some catching up to do. Give yourself regular, attainable goals to meet. For example, you can start by making small, regular contributions to your retirement account. You can then increase those contributions over a few months.
You can also find other ways to maximize your savings. Let’s say you have a favor to help pay off outstanding debt. Once the loan is paid off, you can use that income to supplement your savings. This can add more money to your IRA or savings account. It can also cover the regular household costs that your paycheck would normally cover and then increase your 401(k) contribution to as much as you can afford.
5. Don’t be afraid to adjust
Your goals don’t have to be viewed that way, but setting and revising your retirement goals is key to making sure you’re on your way to retiring comfortably. While you’re not just out of college like some others, you have more than enough time to get your retirement plan in order.
Think about how much money you need to retire that will be with you during your retirement. you can Use the Retirement Calculator To help you find the right number. Use your resources now to help you figure out how to reach that goal. For example, can you increase your contribution now with your current employer or look for a new job that has a heavy employer match? Can you pay off your house before you retire or are you planning to downsize to save on expenses?
At 70, your life may not look like it does at 40, so it’s okay if plans change. Give yourself a little grace and remember that it’s not a bad thing if it doesn’t go according to plan. Take a backup (or two). Your retired self will thank you.
While retirement can go a long way, time is your biggest ally in reaching your goals. The important thing is to start today, even if it is small. you will give yourself time Cultivate the habit of saving and investing And so your goals are much more likely to be reached.
Editorial Disclaimer: All investors are advised to do their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price increases.