Just a couple of decades ago, workers in their 20s didn’t think much about retirement and saving for it. But with the advent of 401(k)s, 403(b)s, and the digital age, it’s become more common — and, with Social Security instability and mounting life expectancies, more necessary — for millennials to begin preparing for retirement sooner. And that’s a great thing!
What do the experts say?
According to info in the 17th Annual Transamerica Retirement Survey of Workers, a whopping 72 percent of Americans born between 1979 and 2000 are participating in 401(k) plans and contributing at least seven percent of their annual pay. And 30 percent of those contributors invest more than 10 percent each year.
Why is this important? Gone are the days of cushy pension plans and the dream of Social Security covering all our expenses in retirement. In fact, only 17 percent of millennials are planning to rely on Social Security to fund retirement expenses, and nearly 55 percent are planning to fund their golden years with self-funded savings.
How do I figure out how much to save?
To figure out how much you should be budgeting for retirement, first off determine when you might want to retire. Most folks today are pushing retirement off to a later targeted age of 67 in order to better prepare financially. Why is that? More insights from the 2017 Transamerica Retirement Survey help explain it. “Unfortunately, 30 percent of Generation X retirement plan participants have taken a plan loan or early withdrawal, with commonly cited reasons relating to paying off debt or unplanned major expenses,” the report cites.
Millennials can learn from the mistakes GenX savers have made and create an emergency fund so they can stick to their savings and investment plans. And as the average millennial wants to retire by the age of 58, they must prepare financially starting now to make it happen.
Use free tools to figure out how much to save.
Know your retirement income goal number — some estimates show that many of us will need to save between $1 - 1.8 million in order to retire. But your number may be different, depending on your goals and lifestyle choices.
Luckily, there are many free tools you can use online to get an idea of how much you’ll need to retire. Check out My Interactive Retirement Planner from Nationwide Financial. This tool asks you about your retirement lifestyle goals, as well as how much you’re saving today and when you think you'll want to retire. It will then generate a number for you, and help you determine how much savings you should target annually to reach that number. The tool also lets you refine the number by adjusting retirement age and bumping the amount you can save up or down, so you can get a better idea of what that retirement income savings goal number means in order to start saving the right amount now. Check out other tools too, from Fidelity and Bankrate. Using a few different tools can help you narrow in on the retirement savings number that will be right for you.
Laslty, use these 3 tips to help secure your future happiness:
1. Invest early and often.
Millennials are in the best spot to be able to save enough for retirement. Most start saving at the age of 22, and once started, this habit can pay off. Most 401(k) investments come out pre-tax right from your paycheck, so if you get in the habit of saving this way, you won’t even notice that small missing amount that can turn into a large amount with compound interest savings over the years.
2. Put raises and bonuses into your retirement savings.
As you receive small raises, just increase your retirement savings percentage. You won’t miss it and it will help you be prepared to meet your future retirement lifestyle dreams. And even if you don’t get raises, still aim to increase your contribution amount by one to two percent each year.
3. Are you a woman? Save even more.
Many retirement savings predictors don’t take gender into account. Women still face gender wage gaps and live longer, so if you’re a female, bump your contribution amount even higher.
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