While we’re young! Crucial retirement advice for millennials

Millennials get a bad rep for being – how shall we put this – somewhat blasé about financial planning.

Sure, some might say millennials have all the reasons in the world to temporarily neglect their finances, not the least of which how young they are. When you’re under 35, which millennials are, saving for retirement or even nearer goals (such as buying a home) can rank pretty low on the priorities next to paying off student debt, affording rent and indulging in avocado toast.

While retirement may not be around the corner for millennials, it should still be on their mind at least as often as avocado toast. There’s a real need for an actionable retirement planning guide that’s designed to cater to today’s young, underpaid millennials, who may soon turn into tomorrow’s old, sick and broke population.

It wasn’t easy, but we came up with an effective retirement planning guide, exclusively for young people. No cliches, either: we won’t spend too long discussing the obvious, because you already know you should contribute the maximum, automate your savings and start saving early.

Now that that’s out of the way, here are 6 ways to give yourself a leg up on your retirement, even if you’re still under 35.

  1. Sit down and get a projection: Seek out the cold, hard truth about your road to retirement. Here is a relatively no-fuss calculator – use it to see how much you’ll likely save by retirement at your current (or expected) rate. Newsflash: you’ll need about $1,500,000 in retirement savings to live according to an average cost of living and an average life expectancy by today’s standards. Don’t worry, that sum is actually attainable thanks to the magic of compound interest – but you’ll need to assess how far you are from the prize, first.
  2. Distinguish and prioritize types of savings: Saving for retirement is should never be your only savings plan. Even if you’re finding it hard to save for one goal, finding a way to do so will ensure you’re covered for all the emergencies and costly milestones you’ll encounter on your way to a comfortable retirement. Save separately and simultaneously for emergencies, retirement and long term goals and short term goals – in that order.
  3. Zero contribution is not an option: Financial hardship can dictate where you live, what car you drive and how much you save. What it should never dictate is whether you save. Regardless of how low your current income stream is, you should always be contributing to a savings account to ensure the habit sticks and you are earning compound interest. Moreover, if you have a retirement savings plan from your employer and you’re not using it yet – what are you waiting for?
  4. Tread cautiously when it comes to debt: Tough times sometimes call for desperate measures, and if you have some funds saved much for retirement, it can seem like a relatively justifiable time to dip into them. However, it’s best to avoid borrowing against your retirement fund at all costs. If you’re seriously considering it, use this tool to know how much money you stand to lose in retirement by borrowing from your 401(k) today. In a nutshell, here’s what you can expect if you borrow from your 401(k) due to hardship (called a ‘hardship withdrawal’). First, you’ll be forbidden from making any contributions to it for at least 6 months (including company contributions). Moreover, you’ll be missing out on any compounding interest on the borrowed sum during that time. Lastly, you’ll lose out on tax efficiency, since loans are repaid with money that’s already been taxed – and 401(k) funds are not taxed unless taken out. By breaking the fund early, you’ll be subjected to double taxation: first now, and in retirement.
  5. If you can, invest – conservatively: You can further build security by investing spare money wisely. We’ve uncovered some decidedly conservative investment routes that you can capitalize one even if you don’t have a ton of startup capital. By the time you quit the rat race, you’ll be glad you took a (modest) chance.
  6. Take every opportunity to save more: There’s an annual cap on retirement savings, but if you’ve reached it and you’re lucky enough to be in a position to save even more, figure out how to do it, and do it. Don’t leave spare money in your checking account or under your mattress, and definitely don’t spend it on Place the surplus in a long term savings account or invest it. Avoid the urge to spend lavishly – no fancy tech gadget, luxury boots or sports car will help you pay for housing and healthcare in your golden years. Don’t give up on money you’re due because you’re too lazy – a refund on that $200 sweater you bought on a whim and can’t drag yourself to the store to return, could mean over $2,000 extra in retirement. No sweater is worth your peace of mind.

Feeling motivated? Now, instead of “treating yourself”, you can channel spare funds to treat your future-self; you know who, the version of you that’ll be retiring. Hardly anything you spend your money on today will matter more in 50 years – we guarantee it.