6 Ways Millennials Can Save For Retirement Now
As the first generation to face life without employer pension plans, millennials face an uncertain path with retirement savings. With more people accumulating thousands of dollars in student debt, making higher and higher house and car payments each month, and having their salaries being perhaps a bit lower than they hoped upon leaving college, millennials face an uphill battle to make sure they have enough money put away when it comes time to retire. However, even with the various financial hurdles they must overcome, there are still effective ways millennials can save for retirement each and every day. To learn how, here are six ways to make it happen.
Balance Student Debt and Savings
Since it’s a virtual certainty most college students will leave school thousands of dollars in debt, millennnials should try to strike as equal a balance as possible between their student loan debt and savings accounts. For example, if they have student loans with interest rates of less than five percent, most financial experts recommend they invest more money in retirement savings, rather than worry about using that money to pay down their student debt. However, if they have high interest rates on their loans, or have multiple student loans, it’s usually best to pay those off as aggressively as possible. To maximize results, most financial experts recommend consolidating high-interest student debt into one loan with lower interest rates.
Since every dollar counts when saving for retirement, millennials should keep very careful track of their spending. While it may seem as if going out to eat now and then or stopping for a special cup of coffee each morning is no big deal, the fact is these purchases can add up over a month or year. To make sure all spending is carefully tracked, consider using various apps such as Mint or Personal Capital. By doing so, these apps can link to checking and credit card accounts, letting you see where every dollar is being spent.
Use Employer Retirement Plans
If millennials have access to a 401(k) plan at their job, they should always contribute to it each payday. In most cases, employers will match employee contributions, which can help the retirement savings account grow at a much faster rate. However, if your employer does not offer a 401(k) plan, don’t panic. Instead, look to open an Individual Retirement Account at your bank, more commonly known as an IRA. Since these are similar in many ways to a 401(k), the only thing you’ll be losing out on is the employer matching of funds.
Starting Small is Okay
While many millennials think they need to save large amounts of money each month for retirement, that’s not the case. Even if they can only put aside $20 per month, this small amount will add up over years and decades. By being consistent each month, even with a small amount of money, it will pay off in the end.
Be Willing to Sacrifice
When saving for retirement, millennials must be willing to make sacrifices. For example, rather than renting that luxury apartment in the heart of the city, consider the less-fancy one on the outskirts. By doing so, you’ll save hundreds of dollars per month in rent, which can then be put into retirement savings.
Stick to a Budget
While it sounds simple, sticking to a budget is a problem for many people, including millennials. However, by making out a budget at the beginning of each month and sticking to it, you can often find your savings will grow much faster than you anticipated. By knowing exactly how much money you will spend month to month on housing, food, clothing, entertainment, and other aspects of your life, saving for retirement may be much easier than you anticipated.
By keeping these six tips in mind, millennials may discover saving for retirement may not be the overwhelming and seemingly impossible challenge they envisioned. Whether paying down student debt or simply putting aside $20 each month, remember that a dollar saved is a dollar earned.