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
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.
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