There are a lot of jokes about millennials saving for retirement, not the least of which is that many of them don’t believe they will be able to retire. The world is a much different place than it was when millennials were born, and it can be challenging to plan for events in the distant future when it seems like so much is changing right before our eyes. But that preparation, even when you don’t know what the future will be like, is extremely valuable.
The old ideas of pension plans and savings as a path to retirement aren’t applicable to most millennials, especially when inflation and the cost of living keeps rising and wages aren’t keeping up. That doesn’t mean retirement is out of the picture, though. It just means that we need new strategies and better approaches to retirement planning.
At the same time, we can’t just discard all that we’ve learned about personal finances. Some traditional methods of saving are important to take into consideration. Still, with the world-changing faster than ever before, millennials saving for retirement need to be prepared to make shifts in their strategies when opportunities arise.
Millennials saving for retirement should consider these financial moves
Hopefully, you have a head-start on these recommendations for retirement savings. If you are behind on your savings, the first essential step is creating an emergency fund that will cover a minimum of three months of your expenses. If you don’t have a fund for emergencies, you will be dipping into your savings for every inevitable issue.
Yes, it may take some time to accomplish that, but it’s an essential first step. Here are four more actions you can take:
Get your 401(k) match – Many employers that offer a 401(k) will also contribute extra up to a certain percentage of your salary. Whatever that percentage is, it should be your minimum contribution to your 401(k). This is literally free money. Don’t ignore it.
Balance between paying off loans and saving– When you need to pay off loans and save, it can be hard to know how to manage between the two. Make sure you are at least paying the minimum on any student loans and car loans to avoid penalties. Pay off credit card debts as soon as possible. Aside from those payments, you can begin to prioritize savings. Strike a balance that makes a dent in your loans while helping you see progress in your savings. Don’t be discouraged if you don’t feel you can save much yet. Creating a habit of saving will be your greatest asset.
Multiple sources of income – Some millennials saving for retirement will cry foul, but the days of being able to retire from a single income stream may be long gone (unless, of course, that income is large and well-saved). An extra stream of income could look like a side gig or perhaps even a rental property. Some millennials are getting deep into real estate investment and seeing it pay off.
Live below your means– If you think this one is obvious, great. Still, the fact remains that many people are not doing it. The fundamental requirement for saving money is spending less than you make. Take stock of where your money is going and evaluate what expenses you can cut.
By far, the most important thing that millennials saving for retirement can do (and this really goes for anyone) is to get started. Begin planning for how you want to retire. Get an idea of what kind of savings and financial foundation you will need for that lifestyle and start working in that direction. Building the habits that will lead to that lifestyle is the first step in achieving it.
Are you among the millennials savings for retirement? What steps have you already taken to achieve your retirement goals?