4 Retirement Planning Tips Millennials Wish They Knew Sooner, According to Experts
Written by
Daria Uhlig
Edited by
Rebekah Evans
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Millennials face more conflicting financial priorities than any other generation, according to a Goldman Sachs Asset Management report titled “Diving Deeper into the Financial Vortex: The Generational Divide.” The report revealed that 73% of millennials have credit card debt and 75% are paying down loans. Over three-quarters (76%) are financially supporting family members. And a whopping 82% feel they have too many monthly financial expenses.
Despite those hardships, millennials also have the highest confidence that their retirement savings are on track or ahead of schedule. But considering that they’re the generation most likely to manage their retirement savings and income without professional guidance, their confidence might be somewhat optimistic.
GOBankingRates spoke with financial advisor Solange Kolie, founder and CEO of financial coaching company Freedom Empire, about financial lessons millennials often wish they’d learned sooner. She offered tips to help you avoid the same mistakes.
Start Saving Early
“Many people think they’re too young to start planning for retirement, but the reality is that the sooner you start, the better your chances are of accumulating more wealth over time,” Kolie said. “Waiting too long can leave you scrambling to catch up later on.”
A case in point: If you begin investing $100 per month at age 30 and your investments return 9% per year, you’ll have $296,485 at age 65, according to Investor.gov compound interest calculator. Delaying investing by five years, to age 35, reduces your total investment contributions by just $6,000 but costs you nearly $106,000 in compounded growth — free money — by age 65.
Pay Yourself First
With so many financial responsibilities vying for your income, it’s easy to sacrifice your savings for other priorities with the intention of making up for it later. Kolie said that’s a mistake.
“If you don’t prioritize saving before you start spending, it becomes much harder to find money for retirement down the line, ” she added.” Setting aside a portion of your income right away is crucial to building a strong financial future.”
Participate in Your Employer’s 401(k)
Kolie said that not taking full advantage of employer-sponsored retirement plans, such as 401(k) plans and 403(b) plans, represents a missed opportunity to bulk up your nest egg — especially if your employer matches some or all of your contributions.
“By not contributing enough to capture the employer match, you leave free money on the table that could significantly boost your retirement savings,” she explained.
Don’t Save Your Money — Invest It
Savings accounts pay an average interest rate of just 0.46%, according to the FDIC’s most recent rate cap report. Even the best high-yield accounts have rates below 5%. By contrast, the S&P 500 has returned over 10% per year, on average, since the 1950s, according to Seeking Alpha, an investing news platform.
“While saving in a bank account may feel safe, it often yields little to no return,” Kolie said. “To truly grow your money, it’s important to invest in options like growth mutual funds, which can harness the power of compound interest over time and help your money work for you.”
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