Retirement Advice – Pass It On to Your Millennials
One question we often get at River Wealth Advisors from our clients is how they can help their adult children jump-start their retirement savings. The answer that applies to everyone is “get started now”; no matter how small, your savings will add up over time. Don’t underestimate the power of compounding returns.
A recent Millennial Money Study by Fidelity Investments revealed that while adult children are striving for financial independence, for nearly half (47%), their parents are still paying for ongoing expenses (e.g., cell phones, utilities, cable service). There has also been an increase in adult children living at home, with 21% of millennials reporting they are living under their parents’ roofs.
Besides being able to reduce living expenses, sharing a home with their parents also helps millennials by seeing firsthand how to build a stable financial future. Sixty-five percent of those surveyed said that their parents have provided good examples of how to build a successful financial future. Developing sound savings habits at an early age provides a number of big advantages.
One great example of saving your way to financial stability is Grant Sabatier, the founder of Millennial Money. Dubbed “The Millennial Millionaire,” Grant went from having just $2.26 to his name to accumulating over $1 million in five years. He’s dedicated to helping others in his generation build wealth and has launched www.millennialmoney.com as a resource.
The first step in starting to save for retirement is figuring out how much you can put aside each month. Nearly one in five millennials surveyed said they spend money “as soon as I get it.” Some of this can be attributed to the fact that this generation relies on debit cards and mobile payment services, rather than cash, so the outgoing funds aren’t as tangible.
A good way to start figuring out where you can save is to create a spreadsheet of all your monthly bills, expenditures and income. From there you can identify any extra spending that can be trimmed. Maybe it’s as simple as packing your lunch or changing your cable package. Ten dollars here, twenty dollars there – it all starts to add up. Keep in mind this is a process; getting started is the most important step.
If you are eligible for an employer-sponsored retirement program, be sure to participate. It’s important to remember that any money that you contribute is pre-tax, so you get the advantage of building your retirement while lowering your taxes.
How much should you save for retirement? In general, the recommendation is to put at least 10% of your income each year, which includes any employer match, into a tax-advantaged retirement account. The conclusion of the research was that on average, the single most powerful change that millennials could make to improve their retirement outlooks was to save more.