7 Moves Gen Zers Must Make Now If They Want a Comfortable Retirement
Saving for retirement may seem incredibly daunting to Gen Zers. However, the good news for this young generation is that time is on their side — if they make the right moves now.
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With the luxury of time, this generation can gradually accumulate savings, thanks to the power of compound interest. To fully reap the benefits of this snowball effect, consistent contributions to retirement savings accounts are essential. By sticking to this strategy, individuals can relax and observe their wealth grow steadily.
Here’s what Gen Z needs to do to in order to kick back, unwind and watch their money grow.
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Envision What You Want Your Retirement To Look Like
Have you ever wondered what your retirement might look like? Will you live out your golden years lounging on a yacht sipping cocktails along the Gold Coast or hosting barbecues with loved ones closer to home?
“Spend time thinking about your future self, what you want your retirement to look like, where you plan to live, how you plan to spend your time and even imagine what you might look like in 40 or so years,” said Carla Adams, founder and financial advisor at Ametrine Wealth. “It’s so tempting to focus on the here and now and enjoy your hard-earned money today. Research studies have found that people who have more of a connection to their future selves — as opposed to seeing their future selves as more of an abstraction — have less debt and more wealth.”
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Start Saving Early
Retirement planning is likely not a priority for most young Americans — it is decades away, after all. However, starting early is crucial. Even small contributions will be able to enjoy the benefits of compound interest, allowing time and consistent saving to do the heavy lifting.
“Aim to put at least 10% of your income away each year towards retirement,” Adams suggested. “If you are not currently able to put away 10% of your income, then try increasing your contribution each year by 1% until you get there. Retirement may seem like a long ways away; but, the sooner you start saving, the better off you’ll be.
“Getting in the habit of saving each month is really important, and the power of compound returns will really boost your nest egg over the long term.”
Get Out of Debt and Stay Out
With many Gen Zers still juggling student loans and a low starting salary, it’s easy to justify taking on more loans and digging yourself into a deeper financial hole to make your current living situation more comfortable.
“The biggest thing Gen Z can do now to set up their future is to get out of debt and stay out,” said Jay Zigmont, Ph.D., CFP and founder of Childfree Wealth. “While it may be counter-cultural, it is possible to live a life without debt. The first step is to lock your credit cards and stop taking out any more debt.”
Take Advantage of Employment Benefits
While Gen Zers might be just dipping their toes into the professional world, they are already savvy enough to understand the value of money and the importance of grabbing hold of money wherever they find it. This means always taking advantage of retirement matching benefits at work.
“Companies are actively contributing to their employees’ retirements with matching 401(k) contributions or other stock incentives,” said Brock Westbrook, CFP, manager of advanced markets at COUNTRY Financial. “Typically, for an employer to contribute to the employee’s retirement plan, the employee also needs to contribute. If you start out with a certain percentage during these beginning stages and continue to increase it as you advance in your career, you won’t know what you’re missing, and your older self will thank you.”
Diversity Your Investments
You can’t have just one of something good. Just as you wouldn’t rely on a single social media platform to stay connected, the same principle applies to retirement investing. If you have more than one option, you have backups to rely on in case Option A falls through.
“Gen Z cannot just rely on the usual retirement plans. Instead, they need to be strategic with their finances,” said Kelly Ann Winget, founder and CEO of Alternative Wealth Partners. “Instead of sticking to the conventional 60/40 portfolio split, which may not cut it when things get rocky in the market, they should diversify. Think real estate, private equity or even precious metals.
“Accredited investors swear by alternatives because of their potential to deliver high returns and their hedge against market fluctuations.”
Don’t Settle for High-Yield Accounts
Sure, stashing your retirement savings in a high-yield savings account (HYSA) sounds like a smart move. HYSAs offer easy access and better interest rates than traditional banks. But, the harsh reality is that relying solely on this option might hold your retirement savings back in the long run.
“When it comes to saving and investing, don’t just settle for high-yield accounts,” Winget said. “While they might do OK for now, who knows what may happen with interest rates? Alternative assets can help generate passive income and long-term growth, which can help with a cushy retirement.”
Protect Yourself From Retirement Savings Scams
In today’s hyper-digital age, dodging scams can feel like playing an intense game of digital whack-a-mole. But fear not: With a few savvy moves, you can protect your hard-earned cash and retirement dreams.
“Stop looking for that get-rich-quick scheme,” Adams said. “Yes, people can get lucky and make big [money] fast, but that is very much a rarity. For the vast majority of people, wealth takes time, patience and diligence to build.
“Keep putting money away bit by bit and investing it in a diversified portfolio and you will be rewarded. There are so many schemes and scams being pitched on social media these days. If it seems too good to be true, it probably is.”
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This article originally appeared on GOBankingRates.com: 7 Moves Gen Zers Must Make Now If They Want a Comfortable Retirement