With the rising cost of living, student loan payments, and lack of financial literacy, it’s hard for Millennials to save for retirement. Many Millennials end up in credit card debt because of too many monthly payments and lack of job stability. They are also not equipped with the right information to handle their finances. It’s important for Millennials to realize that they should start saving as much as they can as soon as possible.
How Millennials Can Save for Retirement
- Build an emergency fund: Millennials should make sure they have an emergency fund that can cover at least three to six months’ worth of income should an emergency occur, such as a job loss or unexpected medical bills. It’s recommended that Millennials save at least 15 to 20 percent of their gross income so that they can live in a comfortable nest egg during their golden years.
- Pay down debt: Come up with a plan of attack to eliminate debt. You can either pay your debt off by smallest balance to largest balance or by largest interest rate to smallest interest rate. You need to start saving now, even if that means putting only $5 per month into a savings account. Every penny counts, and this holds true for spending, too.
- 401(k): Take advantage of 401(k) plans. It’s important that Millennials contribute at least six percent of their salary to a 401(k) plan. Many employers will match up to 50 percent of the annual contribution. This option is tax-deferred.
- Invest: Consider a balanced approach with high and low risk investments. High risk investments can generate high returns, whereas low risk investments have a smaller chance of losing money. Use technology, such as investing apps, to help you.
There is no right answer to saving for retirement. By creating financial goals and making small changes to your lifestyle, you can achieve a successful retirement.