Millennials are saving more than ever for retirement — an average 7.5 percent of their income, according to Fidelity's retirement readiness biannual report. Still, what your millennial children are saving is far from the firm's recommended benchmark of 15 percent per year.
GOBankingRates asked financial experts about the top retirement lessons young professionals can learn by studying their parents' road to retirement.
Click through to get advice on how to help your kids avoid making unnecessary retirement planning mistakes.
1. Create a Strategic Plan
Only 54 percent of baby boomers have money saved for retirement, according to a recent report released by the Insured Retirement Institute.
"One of the biggest mistakes people make with their retirement is to put off looking at what is needed for retirement until it's pretty late in the game," said Katie Brewer, a certified financial planner and coach to Generation X and Generation Y savers with Your Richest Life.
Encourage your kids to start projecting future financial needs in their 20s and revisit the plan every few years. "You should know whether you are on track for retirement or not in your 20s, 30s, 40s and 50s," said Brewer.
Find out how much you need to retire.
2. Start Saving Early
Many boomers have saved just a small fraction of what they'll eventually need to retire, making it so important for younger generations to start saving for retirement earlier. Even making small financial sacrifices — like the cost of a daily morning coffee purchase — can add up and become meaningful.
"You may believe you'll work forever and have time to save, but often that isn't the case," said Jim Poolman, executive director of the Indexed Annuity Leadership Council. "Every six years you wait to get started doubles the required monthly savings you'll need to reach the same level of retirement income."
3. Create Multiple Streams of Income
Many retirees were ill-prepared for their low-risk pension plans drying up a few decades ago.
Today's workers, even those at jobs that come with pension plans, can still learn from that lesson by casting a wider net and creating a strategy that includes more than just a 401k payout.
A suggestion for your children, said Poolman, is "combining traditional savings vehicles like a 401k with low-risk options such as fixed-indexed annuities, which will help keep you financially healthy and on track to a happy retirement."
4. Pay Attention to Investment Fees
Young workers are less willing to hand the reins over to their financial planners, said CFP Daniel P. Johnson of Forward Thinking Wealth Management.
"If an investor enjoys historical market returns and pays a 1 percent management fee, they will lose nearly 40 percent of their returns over a 50-year period of time, due to this management fee," he said.
Instead, in his practice, Johnson sees millennials who are insisting on greater fee disclosures and transparency with decision making. Teaching your kids to be financially literate helps them know what percent of assets are working in their favor.
5. Add Up the Little Things
It's easy for your kids to assume they don't have any wiggle room for extra retirement savings in their budget. However, Katie Gampietro Burke, founder of Wealth by Empowerment, suggests creating a list of all their expenses.
"Everything from the gum you buy with cash at the gas station to the dog treats you pick up for your fur-baby [counts]," said Burke, who urges investors to identify which expenses are really necessary. Small steps can add up to big results.
Find Out How: 15 Powerful Money Habits to Build Now
6. Use Automation to Get Huge Results
Younger boomers age 55 to 59 have three times as much saved than their older counterparts mainly because they are more likely to have a retirement investment with an automatic savings strategy, according to a survey released by Wells Fargo. Urge your children to do the same.
"Pick the amount to put away, pick a good mix of stocks and bonds, and automate it," said Brewer. Some retirement plans might even empower workers to automatically increase their contribution levels at certain intervals such as once or twice a year, said Brewer.
7. Be Prepared for the Expensive Unexpected
Fee-only financial planner Julie Ford, based in New York City with Ford Financial Solutions, said she's seen many workers in their 50s unexpectedly supporting and caring for their aging parents.
"This is a very new struggle with the new landscape of healthcare and longer life expectancies," she said, creating "new urgency to save for retirement."
Thinking about dependency at an old age isn't enjoyable, but it's smart to prepare your kids for it. Late-life expenses will likely include a few pricey surprises. Teach your kid to insulate themselves from the possibility of running out of money by saving early.
Learn These: 3 Steps to Avoid Running Out of Money in Retirement
8. Know There’s Often More Than Meets the Eye
Living a stress-free retirement requires a lot of preparation. "As children, you don't fully appreciate the sacrifices your parents made during your childhood to save for long-term goals, such as your education or their retirement," said Ford.
If your kids can learn to pursue long-term gratification, they'll likely have the most success when it comes to saving for their own retirements.
9. Manage Your Debt
The more your kids have to pay out to monthly debtors, the less they'll have to live on — a problem for upcoming retirees. "Unlike previous generations, retiring boomers are entering retirement with debt," Laurie Samay, CFP and portfolio manager with Palisades Hudson Financial Group in Scarsdale, N.Y.
"This means that a portion of retirement income will need to be diverted from living expenses to repay debt and make interest payments," she said. "If you learn anything from your parents, it's this: Pay down your debt before you enter retirement."
Pay Off These: 5 Debts You Need to Tackle Before Retirement
10. Fund Your 401k
Younger baby boomers have accumulated a large portion of their retirement wealth via their 401k or other employer-sponsored retirement plans, according to the Wells Fargo retirement study. Advise your children to follow your lead "by taking advantage of any employer-sponsored retirement plans, such as a 401k, that may be available to you," said Samay.
"If your employer doesn't offer a retirement plan, or you would like to make additional contributions, consider contributing to an Individual Retirement Account or a Roth IRA," she said. "The sooner you start making contributions, the less you'll have to save in the long run due to market gains and compounding."
Click to find out why compound interest is so powerful.
11. Tend to Your Real Estate
A well-maintained home can have a dramatic impact on an overall retirement portfolio. Some "parents have done really well ... because the mortgage is paid off, and the home is valuable," said John Bodrozic, co-founder of digital home management service HomeZada. Then there are those whose "home is dragging down the overall retirement asset view."
Teach your millennials to view homes as a long-term financial asset. "They should learn the importance of what needs to get done to manage, maintain and improve their homes over time," said Bodrozic.
12. Insure Your Family
Planning for death isn't pleasant, but it's an important step to financial security. The ramifications that come from the loss of a loved one are often more than just emotional.
Ben Offit, partner and CFP with Clear Path Advisory suggests that young professionals consider a term life insurance policy while they're young and healthy. That's when policy premiums are likely to be at their lowest. If your kids wait until they're older with major health problems, it might impede them from getting a policy. Also, ask your employer if they offer life insurance — many do, especially for young employees, because policies are inexpensive.
13. Conduct a Regular Financial Checkup
Coaching your kids to carefully tend to their retirement investments over time equals a better chance of meeting retirement goals. "A lot of people think they are on track, but really have no idea what their retirement balances look like," said Katharine Perry, a financial consultant with Fort Pitt Capital Group in Pittsburgh.
Encourage your kids set up a regular checkup schedule to ensure they're saving enough. "If you are close to retirement and still in a deficit, then ramping up savings might be necessary," said Perry.
14. Prepare for Life to Get More Expensive as You Age
What many parents have learned as they aged is that as wages grow, so do expenses and the cost of living.
Unfortunately, your millennial children might not be as prepared. "[Many] do not participate in their company retirement plan because they have the mindset that they'll 'never get old' or 'I'll save later, when I'm making more money,'" said Perry.
It's ideal to develop a saving habit early, she said, before they have an expensive home or are caring for a child.
15. Don’t Borrow From Your 401k
One way your kids might ruin their 401k is to borrow from it. "I've seen a number of people from the older generations take a loan from their 401k retirement plan or an early distribution from an IRA," said Perry. "They think of this money as an emergency fund. It is not," she said.
Depending on their employer's retirement planning guidelines, they could be charged added interest and fees. More significant is how the loan is repaid — they'll forgo earning compound interest, risk new contributions being suspended and risk a reduced take-home pay.
The takeaway: Avoid borrowing from your 401k except as an absolute last resort.
16. Don’t Use Your Retirement to Fund Tuition Payments
Many older millennials might have children quickly approaching college age. Perry admits she's had clients ask how to access retirement account funds to pay for their child's college tuition. However, she asks you to consider this first: "You can get loans for school, but you can't get loans for retirement," she said.
A retirement account "should be something that's untouched until you need it. It's all that you'll have to live on once you stop working," she said.
17. Prepare for Retiring at Home by Pre-Planning
Many boomers want to stay in their homes for as long as possible, but few are leading by example and planning ahead to make it happen, according to Home Accessibility Consulting principal Michael Saunders.
"As we age, our housing needs change," said Saunders. Some might need to make structural modifications to the home, whereas others might need to plan for maintenance of the existing structure.
To better prepare your millennials, "I often suggest they craft an aging-in-place strategy as early as possible," said Saunders.
18. Add Stability to Your Investment Portfolio
Many baby boomers saw their stock-heavy portfolios decline during last decade's recession. Explain to your kids that riskier assets should be balanced out with more stable securities to help cushion any potential fiscal blows suffered during tumultuous markets.
19. Be Frugal
Finding smart ways to save money throughout adulthood can help put your kids on the path to meeting their retirement goals.
Pauline Paquin, personal finance expert and founder of Reach Financial Independence watched her mother, a single parent raising a family on a teacher's salary, successfully save for her retirement.
"I've seen firsthand that little amounts add up if you start early enough," Paquin noted, indicating that the earlier you start, the greater benefit a young investor can reap from compounding interest.
20. Control What You Can and Let Go of the Rest
"How much you save now is the only variable under your complete control," said Christine Haviaris, CPA and independent registered investment advisor in Pearl River, N.Y. "There are houses to buy, kids to raise and vacations and fun stuff, but if you start [saving] early, you can have your cake and eat it, too."
In other words, teach your millennials to take control of their retirement planning now so they'll be prepared when life's expenses mount and the unexpected inevitably strikes.
Laurel Funk contributed to the reporting for this article.