Millennials, Worry You'll Outlive Your Savings? Here’s What To Do Right Now
According to a study from Northwestern Mutual, over half (55%) of millennials fear outliving their money in retirement. This compares to 45% of Gen Z and 40% of baby boomers.
It’s easy to assume the fear is irrational, but reality reveals a different story. Millennials have dealt with recessions, student loan debt and caring for aging parents, not to mention other current economic headwinds that make finances challenging for many. Fear is understandable, but don’t let it lead to passivity or the belief that a steady retirement is impossible.
Taking these three steps now can steady the ship and breed confidence.
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Identify Where You Stand
Clarity is essential for identifying where to start. It’s easy to calculate what you need to retire and become overwhelmed. Knowledge is key to combat that emotion.
Sit down and determine where you stand financially in all areas. You want to know the following.
Average monthly income
Average monthly expenses
Total savings
Total indebtedness
Retirement account balances and don’t forget the possible 401(k) match
The idea behind this is simple: You want to know where you currently stand. If you don’t know that, it’s impossible to know whether you’ll outlive your savings or not. You don’t need a full plan. Using a free budgeting app, spreadsheet or taking notes on your phone is sufficient for now.
Automate Retirement Saving
Life gets busy or finances are stretched thin and it’s easy to forget contributing to your 401(k) or IRA. Automating your contributions is a simple way to make sure it doesn’t happen again. Many think it’s pointless to save money when it’s a small amount, but starting small is still powerful.
For instance, if you begin saving $250 monthly in your 401(k) and do it for 30 years, you will have around $305,000, assuming a 7% annual rate of return, saved at 65. Saving enough to capture the full employer match is a good way to these increase savings even more.
Don’t overlook increasing contributions by 1% after every raise, either. What if your employer doesn’t offer a 401(k)? You can do much of the same with an IRA through an online brokerage.
Don't let the amount you're saving stop you altogether. If you're living paycheck to paycheck, starting with $25 or $50 a month is still powerful. Ultimately, it’s the act of saving that matters, not the amount you start with.
Embrace Flexibility in Planning
The retirement of yesteryear is in the rearview mirror. No longer do most Americans work for the same company for 30-40 years and retire with a gold watch. Millennials and younger generations may find an upside in being more flexible in their retirement planning.
Flexibility doesn't have to mean a setback; rather, it means having more options in retirement. Retirement doesn’t have to mean ceasing all work at 65 or 67. It can mean finding avenues to earn income in later years, relocating to minimize costs or both.
Flexibility involves knowing what you want in retirement and planning accordingly. Having more options to consider gives greater power to flexibility.
Outliving your money in retirement is an understandable concern. Rather than let it lead to inaction, lean into the issue and identify how you can realize the type of retirement you want.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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