6 Things Millennials Can Do Now To Grow Their Wealth With an Eye on Retirement

Retirement: the magical period of life where you no longer have to work for your money. Instead, your money works for you after years of hard work combined with diligent saving and investing. There’s no question that saving for retirement early and often is necessary to avoid financial struggles in your golden years, and Millennials seem to really understand this. 

The recent Goldman Sachs Retirement Survey and Insights report highlighted that Millennials (those born between 1981 and 1996) feel confident in their ability to reach retirement preparedness. Here are some statistics to note:

• Millennials are most likely to report their retirement savings are on track or ahead of schedule (69%) and only 28% believe they are behind schedule (significantly better than Gen X and working Baby Boomers)
• 43% say they’re very confident that they’ll be able to meet their retirement goals and needs
• 67% have a personalized financial plan for their retirement, more than any other generation

Overall, the retirement outlook is generally pretty positive for Millennials. However, if you’re a Millennial yourself and you don’t feel like you’re on track with retirement savings, there are several ways to change your situation for the better.

Here are six things millennials can do immediately to ensure a financially secure retirement, according to GOBankingRates:

Living below your means is arguably the most important thing you can do to ensure a secure retirement. This means always spending less money than you’re comfortably able to. It can be tempting to get a new car, move into a nicer apartment, and indulge in lavish dinners after you get a raise or promotion at work. However, succumbing to “lifestyle creep” means you’ll spend more money on wants and may not have enough money for your needs. As a general rule, be sure to save at least 15% of your income toward retirement (more if you can) before spending on non-essential purchases.

Investing has proven to be one of the best ways to grow your money over time. Some short-term investments like trading options, for example, carry higher risk and increased tax liability on any gains. Instead, consider long-term investments like dividend-yielding stocks, S&P 500 funds, and bonds, to name a few. Keeping your money in the market over time usually results in long-term growth due to compounding. Plus, you’ll be subject to long-term capital gains tax when you sell investments that you’ve held for more than a year, rather than short-term capital gains tax, which can take a much bigger bite out of your profits.

Everyone has to pay taxes, there’s no way around it. Understanding how taxes work and what percentage of taxes you’ll pay based on your income bracket is key. For example, choosing the correct tax withholding on your W-4 will ensure that the correct amount of taxes is withheld from your paychecks all year. Correct withholdings can help you avoid paying the government too much money throughout the year or a surprise tax bill owed when you file in April.

When you’re younger, it’s okay to make some riskier investments that have the potential to yield a high reward. If the investment fails, you still have a lot of time to make up financial ground. However, as you approach your retirement years, it becomes crucial to prioritize more conservative investments like mutual funds and bonds. They typically have a lower yield than other investments but are more likely to yield a solid, predictable financial return.

If you don’t already have an emergency fund, it’s critical to start building one right away. You never know what life can throw at you: a surprise home repair, a huge medical bill, or a layoff. First, open a high-yield savings account to use for your emergency fund. You’ll earn a risk-free APY on your cash, which will grow your wealth over time. Set a realistic goal of saving at least $1,000 in cash first. From there, consider automatic deposits that align with your payday. This way, you won’t even feel the difference and you’ll be prepared for whatever life might throw at you.

Staying up to date on the latest financial trends and best practices can mean the difference between retiring on time or retiring at all. Take some time to do financial research so you get a better understanding of the ins and outs of saving, investing, interest rates, taxes, and more.