2 June 2020

Millennials Need to Plan for Retirement Now

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Most millennials expect Social Security to go bankrupt before they retire, with 60 percent agreeing with that statement, according to a new survey by T. Rowe Price. This might be fueling millennials’ saving’s rate, as they are saving 8 percent of their annual salary for retirement, which is nearly as much as baby boomers (9 percent), according the  T. Rowe Price survey that compared a national sample of 1,505 millennials with 401(k)s with 514 baby boomers who have 401(k)s. With the possibility of limited defined pension plans and Social Security going bankrupt, here are five simple ways millennials can ensure they are financially ready for their golden years.

1. Aim High 

But is 8 percent enough? As to how much a millennial should actually be contributing to their retirement account, Kristen Robinson, Senior Vice President, Women and Young Investors for Personal Investing at Fidelity Investments, recommends aiming to contribute 15 percent, especially if a twenty something has already paid off their student loans.

2. Use employer resources for allocation advice 

Contributing to a retirement account is half the battle. For the uninitiated, determining how to allocate that money can be downright confusing. While most experts agree that millennials should choose riskier investments as time is on their side, it might not be clear what that means in practice.

3. Think about a robo-advisor 

Another great resource for financial planning are the increasingly popular robo-advisors. These online tools will, for a much smaller fee than a real financial advisor, help pick investments and monitor an individual’s portfolio.  However, there is one blind spot for robo-advisors: an individual’s 401(k).  Most of the bigger robo-advisors do not manage 401(k) investments. Some of the robo-advisors will offer free advice on 401(k) allocations, but only if an individual is investing other money with their services.

4. Don’t make retirement a dirty word 

“Don’t let the word retirement put you off,” says JJ Montanaro, a certified financial planner at USAA.  Montanaro goes on to share a story of his clients – a married couple – who worked until they were 40 years old, as a physician’s assistant and a nurse. They wanted to move to the developing world and do the same kind of work, but on a volunteer basis.

5. Focus on saving more, not boosting returns 

Instead of focusing so much on upping percentage points, the best way to attain a healthy retirement account is simple: save more. The one thing we definitely know is that if you save more money, you will have more money in the end. That is what you can control.

Click here to access the full article on Forbes.

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