Yahoo Finance The Truth About Retirement: 5 Facts and Trends Millennials Need To Prepare For
As a millennial, you may think that retirement is a long way off, but if you haven’t started planning for it, you may be a step behind.
But don’t worry too much — you still have time. The oldest millennial is currently in their early 40s, leaving a quarter of a century or more before they receive their final paycheck. But if you are hoping to have a fully-funded retirement, you’ll want to consider these five facts and trends millennials need to prepare for before you say sayonara to your salary.
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Don’t Count on Government-Funded Programs
Millennials have grown up under the threat of Social Security running out before they are old enough to receive benefits. Today, the Social Security Administration projects that starting in 2035, the program will only be able to pay 75% of scheduled benefits. Without a solution, millennials may not see their full Social Security payouts.
However, millennials can prepare for these shortcomings by turning to self-funded retirement plans like 401(k)s and IRAs.
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Save Early and Often
An advantage that millennials have over the generations before them is time: Millennials still have time to start saving for retirement, but it isn’t infinite. If you haven’t started putting money away, you need to start now — and perhaps take a more aggressive approach, especially if you are an older millennial.
Millennials, as a generation, have more investment options compared to their predecessors. A 2023 Vanguard study found that millennials are more prepared for retirement than their parents or grandparents. They are on track to replace 58% of their pre-retirement income, compared to 50% of late boomers.
One reason millennials are tracking better is because of innovations including “automatic enrollment, automatic escalation of savings rates over time and automatic investment in a mix of stocks and bonds consistent with a retirement goal,” according to the study.
Don’t Plan on a Pension
Pensions are a thing of the past at most companies, but employer-sponsored retirement plans are all the rage. Many companies offer matching contributions, meaning they will match the money that you put in, up to a certain amount. Millennials who aren’t taking advantage of these offers are losing out on free money.
As explained by Western & Southern Financial Group, “Let’s say your employer offers a 401(k) match up to 5%. If you make $50,000 a year and are putting at least 5% of your salary into your 401(k), your employer is tossing an extra $2,500 — essentially free money — into your retirement account for you.”
You May Be Supporting Your Aging Parents
Another consideration for millennials when it comes to retirement is that yours might not be the only mouth you are feeding. With people living longer, many millennials may be supporting their aging parents when they quit their morning commute.
Some millennials are hoping their kids will return the favor. As reported by CBS News, one in five millennials are counting on their offspring assisting financially during their retirement.
You May Still Want To Work
Just because you are retired doesn’t mean you won’t want to work. You might need a part time job or a side gig to manage your expenses, but you might just want to keep busy.
Many retirees use their time to do something that they are passionate about instead of working purely for the paycheck. The good news is that if you have a fully-funded retirement account, you will only have to work because you want to — not because you need to.
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