For younger generations, thinking about retirement has seldom been a priority. A recent report from Country Financial confirms that this is still true, arguably painting an even bleaker picture than usual.
According to the survey, one–quarter of all Americans have saved nothing for retirement, or are not sure if they are saving. Within the millennial generation of 18-29 year olds, that number rises to 32%. These numbers jibe with a recent MoneyTips survey that showed that one-third of Baby Boomers have no retirement plan.
Why don't millennials save? Is it unemployment? Collegiate debt? Lack of priority? Perhaps it is just the bulletproof confidence of youth. Maybe it is the exact opposite, with despair over the long-term employment prospects – the survey noted that 46% of Americans do not think it is possible for a middle-income family to save for retirement.
In the end, it really doesn't matter why. The issue is fixing it. If you are among the non-savers, we suggest the following tips to get you on track with the savings plan.
- Analyze Your Debt, Income and Expenses – To expand on the old saying, if you are in a hole, stop digging – and realize the size of hole that you are in. Plot out a monthly schedule of all your income and regular debts, and see how that compares with your discretionary spending.
- Control and Prioritize Spending – Once you have identified all your spending, prioritize it. See how much you would be willing to forgo for retirement funding.
For example, if you ate out two fewer times compared to eating at home, how much would you save? Take that amount and use an online interest calculator to show how much money that would grow into over 10, 20 and 30 years. The difference is staggering. The point is that saving and investing money now as a millennial may be harder for you, but it is disproportionately important.
Granted, if you are unemployed, you have limited options – but you have to keep your spending under control as much as possible. Sacrifice now will pay off in the long run.
- Set Your Goals and Make a Plan – Setting a realistic modest goal can get you excited about the concept of saving, and keep you from being sidetracked by other uses for your money. Sometimes it helps to apportion virtual "buckets" for different spending and saving accounts. Make the savings buckets a priority. First set aside an emergency fund, and then look into stocks or other potentially higher yielding investments.
- Execute Your Plan – In the words of Nike, just do it. Inertia can be one of the biggest problems with saving.
Temptation is the other. If you can set savings up as an automatic deposit from part of your paycheck, you will eventually get used to the new amount of take-home pay, and be less tempted to delay or deviate from your plan.
- Take Advantage of Employer Sponsored and Tax Advantaged Programs – Most 401(k) programs feature some level of employer matching contribution. Failure to participate in that is to literally refuse free money. Moreover, programs such as 401(k)s and IRAs that allow tax-deductible contributions and tax-deferred growth are important to start early.
You are not the first generation to face difficult economic times. You are not the first generation to delay retirement issues, either. Almost 40% of people 40 years old and beyond say they regret retirement savings decisions, with half of those regretting a late start. Learn from their mistakes.
Don't count on Social Security or any government program as your only source of retirement income. Take control of your retirement today, and watch your confidence grow with your savings.
Want to learn more about successful millennials and their habits? Download your free copy of the eBook, “The Millennial Next Door [Revealed]: How to be Financially Successful in Your 20's.”