Are Millennials financially doomed? The state of retirement planning for Millennials
When did you start thinking about retirement planning? Even as someone pretty careful about money and saving, it only recently occurred to me that I've gotten dangerously close to 30 without starting to save for retirement. Turns out, I'm not alone.
Much has been said of the economic challenges faced by millennials. With 40% still slowly working to pay off student loans and unemployment rates for millennials at about twice the national average, retirement definitely feels like something we can worry about later. We've got enough to deal with today.
The numbers behind Millennials' savings habits
This isn't actually a problem specific to millennials. Other generations lag in their savings in general and their retirement planning in particular. The numbers get better as the age ranges increase, but there are still a good number of people not saving for retirement, or not even saving at all:
- Only 43% of workers under 25 participate in 401k's.
- The number goes up to 65% for people 25-34.
- For those 55-64, the number rises considerably to 74%.
- Forget retirement planning, 28% of Americans have no savings at all.
The problem with putting off your planning for retirement until later is that it means missing out on a big benefit. The way compound interest works means that the difference between starting your retirement planning at 20 versus 50 is huge.
Math is not my greatest skill, but luckily Get Rich Slowly has already worked out the numbers for me. Go take a look. Those amounts are pretty powerful.
Tips for starting your retirement planning now
- Start a 401k or IRA, if you don't have one yet. Set up an appointment with an investment broker to get started and make payments into the account automatic.
Bonus tip: Auto-escalate your savings amount by 1% a year. The difference probably won't be enough to seem like much in your day-to-day now, but it will pay off down the line.
- Take advantage of one of the many free retirement calculators available online to gain a clear idea of how much to save for retirement. Putting away something is better than nothing, but putting away the right amount to keep you happy in your retirement years is obviously ideal.
- Treat your retirement savings as different than your general or emergency savings. Your 401k or IRA are not there for you to turn to in emergencies, you'll probably incur expenses if you try to use them this way anyways. Your savings account should be your go-to resource for surprise car troubles or trips to the emergency vet clinic. Your retirement accounts should stay untouched until you're ready to retire.
- Before you say, "I can't afford it" as a knee jerk response to the idea, stop and think. We base our ideas of what we can afford on what we prioritize paying for. Chances are, there are expenses in your life you can cut to make room for retirement savings. If you, like most of us, plan to live a long life, you can't afford not to save for retirement.
Now go and get started! Good luck.