Millennials remain a popular conversation topic across industries, largely because they tend to approach common life experiences in nontraditional ways. When it comes to retirement, research shows millennials continue to challenge the status quo. A recent study conducted by The Center for Generational Kinetics and published by Broadridge Financial Solutions uncovered important insights about how this generation thinks about – and plans for – the inevitable milestone.
66 percent of those surveyed are more confident in savings accounts than workplace retirement plans or real estate. While a different mindset than the Baby Boomer generation, for example, it’s not difficult to understand. Most millennials entered the workforce right before and during the recent Great Recession and are strapped with unprecedented levels of student loan debt.
Like previous generations, though, millennials are well aware of the importance of planning for retirement. Two-thirds of those surveyed are actively saving, and 67 percent prefer in-person meetings and phone calls with financial advisors while building a retirement plan. Millennials also know how to harness the power of the internet to learn about their options. Simply type in “how much money do I need at retirement?” and you’ll be met with countless resources – some more reliable than others.
With so much information available to millennials, it can be difficult to know where to start. The good news: there are a few unwavering principles that will guide this demographic:
Save. the earlier, the better.
Regardless of when you plan to retire, try to save as much money as you can as early as you can. For some people, this means taking advantage of a company-matched retirement plan. Two common options include 401(k) and 403(b)
- According to Mass Mutual, “A 401(k) is a type of workplace retirement savings plan that allows employees to contribute a portion of their income with pre-tax dollars into their own retirement investment account. Variations include 403(b), 457, and 401(a) plans that offer similar features and benefits.”
- Some companies will match a certain percentage of your contributions to help your account grow. For example, a company may contribute 50 cents for every dollar you contribute up to 6% of pay. If you contribute 6% of pay, then add the company match to your contribution, your contribution amount is effectively increased to 9%. This maximizes your savings potential.
- Learn more about 401(k)s, 403(b)s, and their alternatives here.
If you don’t have a company-matched retirement plan, don’t sweat it. There are plenty of other options for you to maximize your savings. Consider:
- IRAs. According to Mass Mutual, “Compared to a 401(k), which you usually invest in through payroll contributions at your employer, an IRA is opened by an individual through a financial services provider, such as an investment firm or bank. IRAs allow you to choose among investment options like mutual funds, individual securities, and annuities. There are two common types of IRAs: traditional and Roth; each have different eligibility requirements, contribution limits, and tax benefits.” Learn more about IRAs here.
- Annuities. According to Mass Mutual, “Some are designed to help you accumulate savings for long-term goals like retirement. Other annuities focus on providing a guaranteed income stream that begins either immediately or in the future.” Learn more about annuities here.
- Certificates of Deposit (CDs) and Share Certificates. These are designed for the long term. You put money in and the longer your term, the more interest (dividends) you earn when you withdraw. Rates tend to be higher than other savings accounts, however they are fixed when you open the account. These provide long-term security as CDs at banks are insured by the FDIC and share certificates are guaranteed by the National Credit Union Share Insurance Fund. Learn more here.
One of the most important things to remember when you’re planning for retirement is that life is dynamic. Your circumstances will change, and life will throw you curve balls. Remember to revisit your plan numerous times so that you can revise as necessary. The best thing you can do to ensure your financial security later, is to start planning now.
At Seattle Credit Union, our representatives are eager to help you map your journey to financial prosperity. We have a number of products and services to help you reach your goals, including connecting you with financial advisors at Mass Mutual.
Need help with retirement? Talk to one of our branch reps to schedule a time with a financial advisor.