How Millennials Should Save for Retirement - An Open Letter

Nov 3, 2021 3 min read

To my fellow millennials,

We’re tired of hearing our names in the news. We’re tired of being the generation described as entitled and lazy. Our millennial generation graduated during a financial crisis, so it’s no surprise that we 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. 

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 do side-hustles forever?

Don’t Let Student Loans Stand in the Way

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. Student loan debt is quickly approaching $2 trillion. The average graduate borrowed $29,650 to walk across the stage. With this hefty financial obligation, it is no surprise that more than 50% 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. 

Take a Close Look at How Much You’ll Need to Retire

How much should millennials save for retirement? The amount we each need to save is bigger than previous generations. 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 seniors. 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

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.

Max Out Your Employer Match

In order to get a head start on your retirement, take advantage of your employer offered 401(k) plan, a critical element of retirement planning for Millennials. 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% of your paycheck to such a plan, but with your company’s match, it could be much less than that. And it can be done automatically so that you don’t even miss it! It’s also taken out before taxes, meaning you give up less to Uncle Sam. 

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 your retirement savings. Even small amounts of money, if invested early on, can grow to an impressive amount with time. Having time to let compound interest grow is the most powerful tool that we have.

Get Professional Help

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. Meet with a Farm Bureau Financial Professional to start planning your retirement today. Your local Farm Bureau agent or advisor can help you understand your goals and put strategies in place to help achieve them. 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. I believe millennials love to prove older generations wrong. Let’s prove we can save, invest and prepare better than the rest of them.


A hopeful millennial

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