When retirement seems so far away, the common thinking is, “I have plenty of time before I start to save”. However, suddenly those thirty years fly by and you are ill prepared for that big day. As a Certified Public Accountant, I can help guide my clients towards that day in which they retire.
It’s never too early; whether you have a six- figure job in Silicon Valley, or you are working at a fast-food restaurant. According to a handful of financial advisors, that day is more nigh than they may think. The first thing is to save now. No amount is too small, just start now. You can always increase the amount of your contribution at a later time. It is a good habit to start and try not to miss any contribution to your plan.
There are five things to remember:
- It’s never too early to start: This is an often-repeated recommendation. Generation X benefitted from this advice just as Boomers did. Millennials are no exceptions to this advice. If you wait until you are 30 instead of when you are 25, that means you could have 20% less in savings when the time comes, due to compounding interest and value appreciation. If you wait until you are 35 you could be missing out on 40%.
- Your challenges get greater: You’ve probably noticed that five to six-figure college debt you accumulated. It’s tough to balance retirement savings with paying down student loans and paying for a house. Other generations did not experience these issues. You can start with a small contribution to your retirement and increase it 1% per year.
- Don’t rely on Social Security: FinancialPlanners say it is a misnomer that Social Security will not be there for millennials. It’ll still be there, but not at the generous levels of today. You can plan on it being there, but don’t use it as a crutch. If your company has a 401(k), at the very least, save what it takes in order to get the maximum match from your company; otherwise you’re giving away free money. Index funds, exchange traded funds, and mutual funds are sound investment vehicles.
- Get advice from anywhere: A good starting point might be your parents, who experienced the financial crisis of 2008 – 2009. This could be a learning experience to help avoid the related hardships. You can also get advice from mutual fund companies, stock brokerages and financial advisors, who usually have retirement advice on their websites.
- Visit the tool box: There are countless digital tools on line and retirement calculators. You should check the website of the financial institution you are using.