How 20-Somethings Are Actually Saving For Retirement (And What They Could Do Better)
I recently came across an article that was published on TIME Money last month called, Millennials Are Outpacing Everyone In Retirement Savings written by Alexandra Mondalek. I had been doing research for another piece about understanding retirement goals, and this article caught my eye; The title was actually positive sounding, and I kind of couldn’t believe it was true. I feel as if I’m always reading articles about how behind my generation is, and how we have little respect for the nest eggs we are supposed to be building/nurturing. I’ve grown tired of reading articles about 20-somethings not taking personal financial seriously enough. While I do think some of us 20-somethings could practice more financial responsibility, I don’t think the situation for us a whole is as hopeless as some of the write-ups online would have us believe. This is precisely the reason why the article above jumped out at me. After a couple of read-throughs, I learned that our financial futures are still far from perfect, but we are improving. The article presents some really insightful data, and the learnings presented make for some valuable takeaways, so let’s take a look!
On January 7th, Fidelity released a new study that said, “The typical 20-something is now stashing away 7.5% of income vs. just 5.8% in 2013.” Now, while that doesn’t seem like a huge jump from a few years ago, it is significant. No other age group has shown that kind of jump in their retirement savings. The article highlights the areas in which we are improving, and author Alexandra Mondalek references the “retirement preparedness” score—a measure of how well people will be able to afford at least their essential expenses in retirement. Mondalek writes, ” Americans have significantly improved since the benchmark was last assessed in 2013 by Fidelity.” The article continues on to say that while Millennials are making good on their promise to save more, even if they aren’t necessarily cutting spending on things they value (like experiences), they need to continue to look ahead to their future. Mondalek writes,
“Younger workers still need to step up their savings game, however. Millennials’ retirement preparedness score is 12 points below baby boomers, who are nearing retirement or already there. But Millenials have nearly caught up to Gen X, whose score is only three points higher.”
In short, our generation is taking the necessary steps we need to in order to set ourselves up for a comfortable retirement, but we are still in danger of falling short. We need to continue focusing on putting away enough of our monthly earning toward savings. The end of the study presented in the article leaves us with tips that talk about three accelerators to improve retirement readiness. I’ve condensed them a bit (for ease of reading here), but in a nutshell, they are:
“Raise savings. Even small increases in savings can make a big difference.
Review your asset mix. Although you can’t anticipate market behavior, you can build the potential for long-term growth into your portfolio through investment choices and exposure to various asset classes that can provide growth and outpace inflation, while also limiting downside risk.
Retire later. The longer you can wait, the more time there is to build savings.”
You can also use this CNN Money Retirement Calculator to figure out how much you should have stashed away for retirement depending on your age, how much you make, etc. Obviously, the calculator doesn’t take your personal goals or the nuances of your current situation into consideration, but it does provide a rough outline of what you should have saved if you want to be on track for retirement. I’d definitely recommend checking out how you can get a jump start on retirement here and here.
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