When the Millennial generation retires, they will have paid off a larger average student loan debt than any previous generation and will receive less financial support for retirement from their employers and their government than those who went before them.
Employers are pulling back on retirement benefits and the current embattled state of Social Security makes its future existence questionable—just two reasons experts believe many Millennials will be working until the age of 75.
On Their Own?
All prior generations have received Social Security income because they have paid into the system their whole working careers. There is a possibility that Social Security benefits could be reduced significantly or eliminated completely for younger generations due to the deficit the program is currently running.
What makes matters more difficult for Millennials is that employers’ retirement packages are not as lucrative as they were for previous generations. Millennials will be forced to save more of their own money for their future retirement. The Baby Boomer generation’s employers were likely to provide retirement benefits like a pension and health insurance. Today, the retirement healthcare benefit is all but gone and workers are tasked with saving more of their take-home pay since most employers do not match 401(k) contributions at levels they did in the past.
We generally don’t see Millennials thinking about their financial situation 50 years into the future—they’re more concerned about nearer-term goals like marriage, parenthood or home ownership. But we urge those entering the workforce to save whenever and as soon as they can.
Here are three ways Millennials just starting out can make things in 2065 a little easier for themselves.
Don’t throw away free money.
Make sure you’re saving as much money in your 401(k) plan as your employer will match.When college graduates first enter the working world, they do not consider saving for retirement because of how far away the goal is to them.What they may not realize is that most employers match up to a certain dollar amount of employees’ retirement contributions. No one wants to wake up one day and realize they have thrown away years of “free money.”
Pay yourself first.
Contribute to your savings as if it were a monthly bill. Saving money can be difficult when you get your first job and there are many expenses in your life.Set up a direct deposit for a portion of your paycheck to a separate account that you do not use for day-to-day expenses. This may help you avoid impulse purchases because the money is not as easily accessible to you.Even if you are saving $20 each week, you are saving something and building good habits.
Live at home.
If your parents are willing, moving back in with them for a few years will allow you to pay down some debt and maybe even save for a down payment on a home. This has become a more common situation for recent college graduates.
Though retirement seems far away for twenty-somethings, implementing some or all of these simple strategies can help Millennials get started on their retirement savings.