Crippling student-loan debt, underemployment (if employed at all) and still living at home with mom and dad are key issues millennials must deal with today. It would seem that saving for retirement would be nearly impossible given those circumstances. But would you believe that about one in six millennials has already managed to save more than $100,000 for retirement? That amount is well beyond what the average 50-year-old has saved, according to a GAO Study.
Why is there such a large gap between the mean and median numbers? The mean numbers are the average of all of the retirement assets of people within that age range. It takes many people with zero retirement savings to bring down the average from just a few billionaires or mere multimillionaires.
The median number is the middle number where half of the people have less than that amount and the other half have more. According to the survey, 50% of people aged 50-55 have less than $8,000 saved for retirement.
If you ask the internet to tell you how much you should have saved by the time you reach 30, you will get a wide array of answers and often a specific dollar amount. However, the amount you should have saved, by any age, should be determined by how much you earn. That being said, you should strive to have saved at least one year of salary by the time you reach age 30. Hopefully, many of you reading this have saved more. Do not worry if you have saved less.
To help put that in perspective, understand that the median salary for workers between the ages of 25 and 34 is about $40,000 per year. With that in mind, it would seem that the reported 16% of millennials who have saved $100,000 or more are ahead of the game. I would gather that a good number of those big savers were lucky enough to have above-average incomes. A larger salary does not mean you will save anything, but it can make it a bit easier.
Before you say it is impossible to save $100,000 by the age of 30, I want to throw out that I personally saved a year of salary before I was 30 years old. Of course, there are exceptions to who should be focusing on this. For those still in school or a medical residency, your net worth is likely to be negative (after accounting for student loans).
For those who started working right out of high school, you should shoot to be ahead of the one-year salary mark. If you are in your late 20s and just starting to save, set a goal of saving 10-20% of your salary each year. That should help you get on track for your financial goals before you know it.
Do not beat yourself up if you have a substantial amount of student loan debt. I think it is reasonable at this age to count the money you are using to pay down your student loans as “money saved.” The same goes for credit card debt, assuming you are actually working to pay them down and not making the minimum monthly payment.
The best advice I can give is to make saving automatic. Whether you are putting money every month, or every paycheck, into a savings account, retirement account or investment, make it automatic. You may be surprised when that automatically saved money goes unnoticed.
Why make it automatic? It is easier and you do not have to think about it. Also, when it is automatic, the odds of your continuing to save go up exponentially.
Finding it hard to save? Let tax-advantaged accounts make the job a little easier. Consider putting money into a 401(k) or Traditional IRA. You will get a tax deduction for the money you invest, and depending on your income and where you live, that amount could reduce your tax bill.
Additionally, if your employer matches retirement contributions, contribute! It is like free money. You put in one dollar and your employer will typically put in between 50 cents and one dollar, up to a specified percentage set by your employer. Missing employer contributions throughout your entire career could end up being a million-dollar mistake.
While I am not a millennial, I am married to one. I also work with many who are looking to reach their personal financial goals like buying a home, taking a fabulous vacation and achieving financial freedom. Wherever you stand financially, the important thing is to start saving for your future. When I graduated college, a mentor helped me set up a Roth IRA where I made a monthly $25 contribution. That habit of saving monthly has served me and my family well over time.
Dream big, work smart and get saving. What steps can you take now to improve your financial future?
This article was written by David Rae from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to firstname.lastname@example.org.