How Should Millennials Save for Retirement?

How Should Millennials Save for Retirement?

August 11, 2016
Share |

Young professionals face many choices when it comes to allocating their resources – travel, housing, education. I talk with recent college graduates who just want to find a good job and support a comfortable lifestyle. My concern is always the same: achieving financial independence and a secure future requires long-term planning. 


If you are a young adult in your 20’s, retirement probably seems like a lifetime away, and there is so much to do with your money right now. A majority of millennials do not have long-term savings or retirement plans. Consider this: the financial independence that comes with retirement planning allows you to control when you retire and the quality of lifestyle you can support. 

Saving for retirement is an investment in your future that can be done while still maintaining a healthy work-play balance. Here are five ways to get started:

1. Start with small goals.

Set up modest but regular savings targets and make sure that you meet them. If you get an early start on developing a savings habit, the financial discipline required to reach larger milestones will come more quickly. If your employer offers a direct deposit for your paycheck, use it. You will be less tempted to take some cash from your deposit.

2. Take advantage of employer-sponsored retirement plans. 

Having part of your regular paycheck automatically withheld prevents you from spending it. This makes it a very effective investment option and saving even 1 percent of your salary now could be worth much more by the time you retire. Increase your contribution with each raise you receive – you can’t miss what you didn’t have! 

3. Pay off your student loans.

One of the biggest financial challenges to recent graduates is their student loans. If you have significant student loan debt, now is the ideal time to concentrate on reducing that debt. Consider the strategies for paying off loans earlier than required, like making additional voluntary repayments. Without the burden of student loans, you have more options for where to invest your income. Defaulting on your loans has serious consequences – lowered credit score, additional interest, and garnished wages.

4. Use credit cards wisely.

First and foremost, avoid becoming a victim of credit card debt – where your balance is higher than your ability to pay it off.  It can be tempting to use credit cards when income is irregular or inadequate, but substituting credit for cash often creates a vicious cycle that can be hard to escape. A general rule is to keep your balance below 30 percent of your credit line. 

5. Get professional advice. 

An experienced financial planner can help you develop a savings plan that is compatible with your budget, your current situation, and your lifestyle goals. A planner can also identify specific problem areas and help you work out ways to move forward. Finding financial stability early in your life and career can be the key to successful long-term planning and retirement. Often, all it takes is a little to earn a lot. 

No matter what your age or circumstances, retirement should be part of your long-term financial plan. The library of articles and calculators on my website is a good place to start. Have questions? Get in touch today!

Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.