To my fellow Millennials,
We’re tired of hearing our names in the news. We’re tired of being the generation described as entitled, lazy and whiny. Our Millennial generation graduated in the midst of a financial crisis. Given the current news, it’s not a surprise that 4 out of 5 of us are concerned that Social Security may not be available when we retire. We can’t just stress, eat avocado toast and hope that maybe we’ll become a social media influencer with plenty of money; we have to start retirement planning now to protect ourselves in the future.
Our Retirement Dilemma
We aren’t like the generations before us. They were taught to go to school, get a good job with nice benefits, work up the ladder and then retire to enjoy life. This isn’t our reality. With student loans looming, changing employee benefits and the ever-growing amount of money needed for retirement, will we have to have side hustles forever?
Don’t Let Student Loans Stand in the Way of Saving for Retirement
Our nation is facing a student debt crisis. We get it; in fact, no one knows about the student loan crisis better than we do. The reality is more than just a relatable meme on the internet. This year overall student debt reached a record $1.5 trillion, according to the Federal Reserve. The average graduate borrowed $29,650 to walk across the stage. With this hefty financial obligation, it is no surprise that more than 50 percent of Americans say that they have delayed saving for retirement to make student loan payments. With daunting monthly payments in addition to our other bills and the pressure to maximize retirement savings, it’s easy to avoid thinking of the future. Who can think about a retirement that is 40 years away when we have loans and credit card bills to pay now? We know retirement saving is important, we just don’t know how to start. A good place to start is taking advantage of your employer offered 401(k).
We Need to Understand How Employer Sponsored Retirement Plans are Changing
The way that employer sponsored retirement plans are changing. Thirty years ago, the most popular form was through a pension. Now, companies are putting more emphasis on your 401(k). We must rely on ourselves to invest wisely, maximize retirement savings and take advantage of these products appropriately, hoping that the market holds strong, but without true guarantee.
Amount Needed to Retire
The amount we each need to save is bigger. Way bigger. The Baby Boomers were estimated to need around $1.3 million for retirement. We are estimated to need $1.8 million just to maintain our current standard of living in retirement. Why do we need so much more? First, Social Security benefits are expected to be much less generous than today’s, and it remains to be seen how much is available. Secondly, there’s inflation. The Federal Reserve assumes a 2% inflation rate per year. Two percent doesn’t sound bad, but 2% every year for the next 40 years adds up fast. Third, we’re expected to live even longer. We can anticipate spending about one-third of our lives as “old people.” All of these factors combined mean that we need to be putting away much more money than in generations past. If you want to know a closer estimation on how much you will need, check out our retirement calculator. Here are some other tips to take control of your future.
Make Small Changes to Live Within Your Means
Look at your expenses holistically and determine what can be cut. Can you spend less on rent? Cut your Uber trips in half? Go out to eat less often? Look for opportunities in your everyday life, like skipping the gourmet coffee to save around $100 a month and invest that money in your future. Small amounts contributed today have the potential to grow into much larger savings by retirement. What will be more important when you retire, that cute sweatshirt advertised on Instagram or your savings?
Create a Budget and Stick to It
Not to sound like your parent, but creating a budget can help identify where you’re spending too much, and maybe even uncover extra money. If you don’t know how much money you’re spending in one particular area, let a free budgeting tool help. Most banks offer budget tracking linked to credit and debit accounts. Apps such as Mint and You Need a Budget could also help track. They allow you to link your financial accounts into one central place and categorize your expenses visually so that you can determine where to cut, by how much and set limits for yourself.
Start Saving TODAY
Now that you’ve budgeted and know how much you can save, let those extra dollars do the work for you to maximize retirement savings. Even small amounts of money, if invested early on, can grow to an impressive amount with time. Having time to have our compound interest grow is the most powerful tool that we have.
Max Out Your Employer Match
In order to get a head start on your retirement, take advantage of 401(k)s. Many employers offer some type of matching contribution as part of their retirement plan, usually up to a percentage of your contributions. Industry standards recommend that you should be setting aside 10-12 percent of your paycheck to such a plan, but with your company’s match, it could be much less than that. This could be done automatically so that you don’t even miss what was gone! It’s also taken out before taxes, meaning you give up less to Uncle Sam.
Meet with Financial Professionals
Meet with a Farm Bureau Financial Professional to start planning your retirement today. Your local Farm Bureau agent can help you understand what’s best for you. You don’t need to have a lot of money to get started – what’s more important is that you start now and use a financial professional to help you along the way.
Starting Small Now Takes You Places Tomorrow
With so many other things to worry about, why not take some small steps to help alleviate retirement stress in the future? That way when the time comes you can enjoy all those things you dreamed you’d do during retirement. I believe Millennials love to prove the older generations wrong. Let’s continue by proving we can save, invest and prepare better than the rest of them. And that’s the tea on retirement.
A hopeful Millennial