How To Avoid Being in the 52% of Millennials Who Say They’re Behind on Saving for Retirement
Written by
Laura Bogart
Edited by
Kristen Mae
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For many Millennials, retirement feels like a distant horizon, so far off that it’s hard to imagine it ever arriving. But as the years tick by, that point on the horizon draws steadily closer. One day, you may open your eyes to find your golden years creeping forward — along with the realization that you’re not prepared for retirement.
You’re certainly not alone. According to a recent CNBC survey, a whopping 52% of Millennials report being behind in retirement planning, often due to focusing on paying off loans or debts. If you can relate, circumstances may seem grim. But the way to build a more robust retirement fund is the same way you get through anything else: one step at a time.
1. Imagine Your Retirement Clearly
It’s easy to let retirement savings idle by the wayside when retirement itself feels like an abstract concept. After all, when you’re caught up in the grind of your work-a-day life, imagining life off the clock could seem like a pipe dream. Yet indulging in those dreams might well be the best way to prepare for retirement, inspiring you to set up realistic financial goals to achieve the retirement you want.
For example, do you envision a life of globe-trotting in retirement? Or do you see yourself spending quiet days at home, finally getting to all those books in your home library? Are you committed to donating to good causes or anticipating needing to care for a loved one? The answers to this question will define your savings needs.
If you’re a homebody, focus on ensuring your home is paid off or that you have enough income to cover housing costs. Want to put your passport to work? Save big, and plan for continuing streams of income to fund your adventures.
2. Check in With Your 401(k)
Your 401(k) might seem like a financial engine, humming quietly in the background as you live your life. But, like any other engine, you’ve got to check in on it from time to time, ensuring it stays freshly oiled.
First, make sure you’re enrolled in a 401(k) if your employer offers it or that you’ve opened a solo 401(k) if you’re self-employed. Then, see how much you’re contributing — and look for opportunities to increase it. Did you get a raise this year? Congratulations! Now, put some of that toward your 401(k). If your employer offers a match, ensure you’re contributing enough to take full advantage; that’s essentially “free money” for your retirement.
3. Diversify Your Accounts
Even if you’ve been funding your 401(k), you may find that relying solely on one type of account can limit your potential. To avoid being in that 52% of Millennials who feel behind, consider expanding your retirement strategy.
IRAs (individual retirement accounts) are especially helpful. Both traditional and Roth IRAs offer tax advantages that can help your savings grow. Health savings accounts (HSAs), if available to you, can also be effective for building retirement funds, especially if you anticipate future medical costs. And if you want predictable income in retirement, annuities may offer a low-risk way to supplement your savings.
4. Get Smart With Your Spending
Anyone who’s set foot in a grocery store recently knows that life is pricier than it’s been in a long time. Lifestyle creep — when your spending increases as your income grows — can make it easy to deprioritize retirement savings. Fortunately, you can halt this by doing an honest inventory of your spending habits, either at your kitchen table or with a trusted financial advisor.
One effective way to get ahead is by reducing high-interest debt. Paying down credit card balances and high-interest loans frees up funds you can put toward retirement savings. Plus, building an emergency fund means you’re less likely to dip into your retirement accounts when unexpected expenses arise, ensuring your savings are intact when it’s time to dust off your passport or finally turn that spare room into a library.
Staying Ahead of Retirement Savings Is Achievable
More than half of all Millennials feel they’re behind in retirement savings, but you don’t have to be a part of that statistic. Take a deep breath and start small. Envision the kind of lifestyle you want in retirement, check in regularly with your 401(k), diversify your savings options, and take a sharp inventory of your spending. Exiting that 52% is absolutely doable — one step at a time.
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