3 Things Generation Y Needs to Consider About Retirement
By Annie Cromwell, America Saves Communications Associate
A recent Gallup Poll named “not having enough money for retirement” as the top financial concern among Americans ages 18-65+. A number of employers are offering automatic retirement-savings in an attempt to lessen these fears and make savings automatic, often suggesting that new hires contribute 3% of their pay.
However, experts say that workers should contribute closer to 12%-15%, including both worker and employer contributions. But often that 3% employees contribute is not enough to receive an employer’s full 401(k) matching contribution.
Let’s say you are a young person, ages 18-34, and are having to consider and provide for all of your financial needs, possibly for the first time in your life, and contributing to a retirement savings plan seems too far off to even think about. But you know it is important…what should you do?
Consider These Things
- The earlier you start saving, the more money you gain from compound interest. Many of you might be looking to pay down large debts, invest more in stocks or even making a big purchase like a car or a wedding in the next year. Contributing to a retirement fund may be the furthest thing from your mind. But consider this: compounding is the exponential increase of an investment. So let’s say you put $4,000 in the bank and interest is paid 5% annually, the bank will give you $200 in interest for the first year. And if that $200 stays in your account, it will begin to earn interest too. If you begin early, think of all of the interest you could earn interest on!
- No two savers are alike. You cannot compare the amount that a surgeon earns to a shampooer. And consequently, there is no uniform amount that everyone can/should put away for retirement savings. Consider how much you are earning, then consider your present financial situation (i.e. are you in debt, providing for a dependent, etc.) then adjust your savings accordingly.
- Rest assured that your generation is doing just fine. According to the most recent Merrill Edge Report, 77%of people aged 18-34 are looking to grow their retirement nest egg. The report also found that Generation Y workers between the ages of 18 and 34, with an annual income of between $50,000 and $250,000, have saved an average of $55,000, and hope to save close to $2.5 million by retirement age! Also, many Generation Y workers began saving at an average age of 22, which is more than a decade earlier than the average baby boomer. We’re doing quite well, thank you!
Perhaps you think you have a lifetime before you’ll utilize your retirement funds, and that you’ll have almost as long to start saving; or maybe it’s too overwhelming a task and you’re unsure where to begin; or for some, you feel the amount you could contribute right now would be inconsequential, and better served financing your present needs. Remember, retirement is imminent and you need to save for it. With that in mind, it is also important to know that it is okay to start small, and if you free up some funds in your budget and make a plan you can look forward to a comfortable retirement too!
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