What Millennials Need to Know About Retirement

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Millennial Money
In your 20s or 30s? Have you started saving for retirement yet? It doesn't have to be hard! Here's what millennials need to know about retirement and how to save for it.

Retirement. Seems like it’s lifetimes away. And in some regards, it is.

I’ve heard that the average American has three completely different careers in their life. If you’re in your twenties or early thirties, you may very well still be on your first career. There’s so much yet to come!

Saving for retirement starts now, though. If you want your hopes and dreams for retirement to come true, it pays to think about it sooner rather than later.

Retirement may not start until the golden years of our lives, but it requires savings, time, and major planning to actually reach that milestone.

With the way the world and the workplace have already changed, and continues to change, it’s even more important for millennials to start thinking about retirement now.

Don’t feel overwhelmed though! I don’t want to sound the like big bad retirement wolf. Time is on our side in a myriad of ways: we are literally and figuratively young.

As we’ve talked about on this blog before, that means the power of compound interest becomes our power. You have power! And putting that power into action right now means a fuller and richer (again, literally and figuratively) retirement.

Here’s what millennials need to know about retirement in order to start saving today.

Retirement Funds

If your company offers a 401K, march into HR and start contributing today. Every day lost is another bit of money disappearing into “See You Later, Sucker Land,” a land no one wants to be in.

If you’re self employed, under-employed, or in an industry that doesn’t offer a retirement account, open yourself up an IRA.

Now, the important part of this isn’t just opening up the accounts. Make sure you set up automated payments every month. Compound interest is only your friend if you contribute to these accounts regularly!

Another important fact to consider is the fees and the taxes associated with both IRA’s and 401K’s.

Traditional IRA’s tax the money you put in there as you take it out – so the taxes will hit when you’re retired.

Roth IRA’s tax the money as you deposit it, so you can withdraw it during retirement tax free.

If you’ll be in a lower tax bracket when you’re retired, you may want to open a Traditional IRA. The opposite is true if you’re in a low tax bracket now – a Roth might be better for you.

Take some time to look over your finances and be honest with yourself about if and how your income level will be changing in the next three to five years. Take that into account when you start setting up these retirement accounts.

Ask Yourself Some Questions NOW

Retirement is starting to change. There are some money experts out there who are beginning to predict that our generation’s retirement is going to cost more money than our parents’, due to health care and housing costs increasing.

That means two things: it’s twice as important to start saving early, and it’s twice as important to start visualizing your retirement plans.

Do you want to travel when retired? Own a home and invite the grandkids over for lemonade and cookies? Have a smaller home, but a boat you take out on weekends?

Even if you’re 22, ask yourself some big-picture questions about life values you have. Focus on the realities of retirement, not just your dreams.

Do you want to be married when retired? Are there health problems that run in your family you might need to take into consideration? Will you be having kids, or just sticking with a dog into old age?

Asking these questions, even if you’re avoiding nitty-gritty details that are impossible to answer when you’re at this stage of your life, will give you a leg up. You can adjust your savings rate if you know you definitely want to have kids, or if you know that travel isn’t something you’re interested in.

It’s worth noting that millennials are saving for retirement at much slower rates than previous generations. There are lots of reasons for why this is, but it’s important to be aware of.

Yes, if you have huge debt amounts to pay off, those should be a priority. Retirement can’t fall completely to the wayside, though.

Many of us are having problems with debt now because we didn’t fully understand loans before they were sprung on us after graduation. The high interest rates and cramp on our budget came as a surprise.

Understanding retirement early in life can save you from a nasty shock in 15 or 30 years.

Driving the Point Home

If you’re in your mid-twenties or early thirties, do you ever find yourself wishing you had prioritized saving money a few years ago? Think of where you would be now if you had done that.

It’s the same with saving for retirement. Don’t leave it until the last few years leading up to retirement, or retiring at all might not be possible. You don’t want your 60 year old self wishing your younger self would have saved more.

Saving for retirement doesn’t need to be difficult. In fact, you can start saving with Wherewithal right now – just by earning cash back on your normal purchases.

Millennials, what’s holding you back from starting to save for retirement? If you’ve been saving, how did you get started?

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