Millennials Should be Preparing Early for RetirementSubmitted by JMB Financial Managers on November 15th, 2017
In a society that has grown to value experiences above all else, the last thing on a Millennial’s mind is saving for retirement. But it should be in the forefront. The younger you are when you begin contributing, the more you will have down the road when it’s time to retire.
Most young individuals are focused on short-term goals; travel plans or even paying rent. All of which are great, as life is for living and living well, but important long-term goals are often set aside and forgotten.
Changing Your Mindset to Encompass the Long-Term
With bills to pay and student loans coming due, saving for retirement might be on the back burner for most young people. It can be difficult to see the benefit of stashing away even a small portion of your income when it seems there are more pressing financial matters on hand.
Making a list of your financial obligations is the first place to start. If you can better evaluate how much money you need to obtain your short-term goals whether that be next month’s rent, your car payment, or your next vacation, knowledge is power.
Next, you can decide what your long-term goals are and how to get there. Saving for retirement should be at the top of that list. Once you know what you need to save for in the short-term you can make a more well-informed decision as to how much you can save each month for your eventual retirement.
Although it can be hard to do, if you can change your thinking to encompass a larger picture than what’s right in front of you, you will be able to see the advantage of saving for retirement now.
Remember the Value of Time
When it comes to making contributions to your retirement account I don’t particularly love the cliché, better late than never. Although true, time is arguably the most important factor in saving for retirement.
Even the smallest amount contributed monthly has the advantage of compounding over time and growing into a much more valuable amount than if you begin contributing later down the road. Let’s look at an example of how you can put compounding to work for you.
If you were to deposit $100 at the beginning of each month into a retirement account with an interest rate of 6.00%, compounding monthly, in 360 months your account would grow to $100,954.
As you can see, shifting your focus from the amount contributed to the time that you allow those contributions to grow makes all the difference in the world.
Use Payroll Deductions to Your Benefit
It’s harder to save money when you miss it. Luckily, most companies with a 401(k) plan offer automatic payroll deductions. This means, instead of having to withdraw this money from your account which feels counterproductive, it will be automatically deducted from your paycheck so you never see it at all.
Saving money is hard. It’s even harder if that money is easily accessible. You may have good intentions to save, but if you allow that money to go directly into your checking account, your odds of saving it for retirement significantly decrease. Automatic payroll deductions are a solution to this problem. You can’t miss something you never had.
Looking Further Down the Retirement Path
Although it can be challenging, the benefits of saving for retirement sooner rather than later far outweigh the consequences of waiting. Take a step back and evaluate the big picture and never forget, you’ve got time on your side. Use it. And if you find yourself in need of assistance, please reach out to me at (949) 251-3544 or email me at firstname.lastname@example.org.