Retirement Planning for Millennials
In a nationwide survey conducted by Mainstreet.com, nearly 70% of Millennials have not started planning or saving for their retirement. It’s not that they don’t care about preparing for their retirement, it’s just that the talk of retirement planning can be sometimes intimidating, especially the ones by their employer-sponsored retirement plans. Furthermore, one in three Millennials who are eligible for an employer plan still are not utilizing the plan.
It seems that a lot of Millennials want to begin saving for their retirement, but are stretched thin by their student loan debt and their low paying jobs. Here is a list of tips for people in their 20’s who are interested in successfully planning for retirement.
– Be knowledgeable about the retirement programs that your employer offers. You don’t need to work in the benefits or human resources departments to be knowledgeable about your company’s retirement benefit plans. But you should know the answers to questions about your plans, including
• What kind of plan do you have? (i.e. 401(k) 403(b), profit sharing, defined benefit, cash balance)
• Does your plan offer you the opportunity to top make pre-tax contributions or Roth contributions?
• When will you be eligible for the plan?
• What type of investment options does your plan offer?
• When will you be vested?
• When can you begin to contribute?
• Will your employer automatically enroll you with a set deferral percent?
• Are you taking full advantage of your company’s 401(k)?
– Remember that unless you come from a wealthy family and you have a trust fund containing a substantial amount of money, then you must continually contribute to your retirement account. As retirement plans are not what they use to be, Millenials need to fund their retirement solely on the basis of an IRA, 401(k) or any other plan where they must contribute. Even if you are living on a tight budget, every dollar that you are able to save can be worth much more by the time you retire.
– Increase your deferral percentage every time you receive a raise. Think of this way, prior to your raise you were able to survive on your income, so you will definitely be able to live without seeing the additional income hit your bank account every pay period.
– Take all of the free money that you can get. If your company offers a 401(k) match program, then take full advantage of that free money.
– Avoid taking out loans against your retirement account. No matter how good it may sound at the time, taking out a loan against your retirement is never really a good idea, unless you have to. The money that you are contributing is meant for your retirement, and that’s where it should stay. Even more important, if you don’t pay back the loan within the terms , then the funds that were distributed to you can be subject to a 10% early withdrawal penalty tax.
For more information on successful retirement planning and saving, check out a free live webinar today at 3PM EST discussing “Retirement Planning for Millennials” hosted by The Wall Street Journal.