Reports show that Social Security benefits could be reduced as early as 2034 due to a shortage of funding. That could mean that Gen Z, millennials and Gen X all receive less money than they expect for retirement.
Fortunately for Gen Z, it’s not too late to start ramping up your retirement savings efforts so you won’t feel the pinch. Experts recommend three ways you can prep for retirement at any age, but those who start early will, of course, have an advantage.
1. Let the Numbers Work For You
Have you ever heard of the 50/30/20 budgeting strategy? Using this formula, you should try to allocate just 50% of your income on living expenses like your rent or mortgage, car payment, food, and bills. Then, leave 30% for discretionary spending like entertainment and dining out. Finally, allocate at least 20% for short-term and long-term savings, including retirement.
It’s a good idea to set aside emergency funds of at least three to six months of living expenses. But don’t put emergency savings before retirement. Invest in a 401(k) using pre-tax dollars to get a jumpstart on retirement savings. If the money leaves your paycheck before you even see it, you won’t feel it as much.
2. Put Windfalls to Work
Look for “free money” to help you boost your retirement savings. For instance, if you receive a tax refund, consider putting it into an investment account. If you receive a cash gift from a relative, do the same.
Finally, if your employer offers a 401(k) with matching funds, make sure you are maxing out your contribution to get the full matching funds. It’s free money that goes directly into your retirement account.
3. Speak to a Financial Advisor
It can be scary navigating investments and retirement savings alone. Consult with a financial advisor for guidance on your best steps at any age. You don’t need a six-figure income to benefit from a financial advisor.
A financial advisor can help you with money management, taxes, insurance, estate planning and, of course, retirement. Make sure to find one who holds the designation of a “Certified Financial Planner,” (CFP) and whose philosophies align with your goals.
You can find financial advisors online or you can check with your local bank branch to help you. Investment platforms like SoFi and Betterment also provide access to financial planners to help you navigate retirement planning and more.
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