For many millennials, retirement is an idea that seems too far away. With the rising costs of living and stagnant wages, it can seem impossible to plan for the future when the present is so expensive. Unfortunately, even the youngest millennials need to start planning for their retirement as soon as they can to have the most comfortable future. Here are some retirement planning tips for millennials to start the process.
Start Saving Now
It is easy to prioritize other life goals, such as paying off debt or high childcare costs. The best-funded retirement accounts have the most time to grow. Before you know it, you’ll be considering retirement. It is important to save what you can now, as soon as possible, to give your money its best chance of growing. Even a few hundred dollars here and there can make a big difference.
Anticipate Not Having Social Security
Social security checks seem to shrink each year and there’s the potential that social security benefits could be cut by politicians. For millennials who have more years to go before retirement, depending on social security to help out financially during retirement could be a risky move. It is a much safer idea to save as much for retirement as possible and have a social security check increase your monthly finances than to rely on social security too much and it not be available.
Weigh Benefits of Paying Off Debt First
Financial gurus like Dave Ramsey recommend paying off all debt (except your mortgage) before putting any money toward retirement. However, many millennials have huge student loan balances. Paying off $100,000 or more in student loan debt combined with credit card debt and medical debt could take more than just a few years. Millennials need to weigh the benefits of both strategies with a financial advisor before making a decision. Perhaps paying off all debt except for student loans and the mortgage is a better idea for millennials with large student loans.
At Least Commit to Employer Matches
If you work at a corporation that will match up to a certain amount of money in an employer-sponsored 401(k), it is important to meet the maximum amount. You can put the rest of your retirement funds into another type of account with your financial planner, but not meeting the maximum match is leaving money on the table. If they’ll match up to 5%, invest 5% of your salary into the 401(k). This is less money you’ll be directly responsible for.
Retirement happens before you know it. As the millennial generation becomes a more significant part of the workforce, it’s critical that all millennials start planning for their retirement. You never know what the financial future will bring, but it is never a bad idea to be as prepared as possible.
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