Millennials saving for uncertain future
How are millennials (we) saving for an uncertain future? According to an article by Michael Douglass from CNNMoney, millennials are saving earlier for retirement than their parents were. This is great news for us, but unfortunately the financial outlook is dimmer than in years past. In fact, recent figures from the Employee Benefit Research Institute state that millennials may need to DOUBLE how much we are saving for retirement. This is due in part to expert projections of how the stock market will perform in years, and decades to come. Experts have stated they expect to see a steady decline in average stock gains. In addition to the declining stock market, Social Security might not be available for us when we turn 67.
What to do with such a glum outlook? Well, first things first, you need to have a plan. Do you know how much money you need to save for retirement? Does your job offer a 401k plan with a match? If not, have you considered opening an IRA and investing in mutual funds? Experts say you should be saving roughly 10% to 15% of your income to live comfortably in retirement. Some experts suggest as much as 25% to ward off the potential financial woes of the future economic climate. Starting earlier is better, so the sooner you can start saving, the better off you’ll be. Even a few years can make a substantial difference.
Here are a few quick tips to help you along your path to retirement:
- Have a plan
- Know your retirement savings goals
- Pay yourself first – set aside a planned percentage of money from each paycheck (preferably at least 10-15% or more, if possible)
- Talk to a financial advisor about your situation (they can be free of charge)
- Perform regular assessments of your retirement accounts and contributions to make sure that you’re on track for your goals
- Adjust your contributions as necessary to meet your goals
- Don’t live beyond your means – if you are living paycheck to paycheck, reassess your situation and find ways to make cuts or, better yet, increase your income earning potential
Retirement savings plan
Investment experts suggest you should save double your annual income by the age of 35. The chart below is an “estimated” projection based on a starting annual income of roughly $35k at age 21, with regular 3% annual cost of living raises, a regular contribution of roughly 10% of your paycheck, and a 3% rate of return from your retirement account.
*The retirement chart is for illustration purposes only, and not to be used as a guidepost.
Note: This blog post is intended as informational only, and is not investment advice, consult a financial advisor before making any financial investment decisions.