Are Millennials Equipped for Retirement?

My buddy Fiona, a.k.a The Millennial Money Woman, is a financial ninja and a fellow dog lover! She graduated college debt-free by working 50-plus hour weeks (on top of her regular class and study work) and earned a Master of Science degree in Personal Financial Planning. She bought her first house at 23, co-founded a local non-profit charity, and is now helping others take control of their financial lives to achieve financial freedom early in life!

Are you a millennial and wondering if you’re equipped for retirement?

Well so am I!

If you were born between 1981 to 1996, then you would be classified as a Millennial. The coming of age for a Millennial has not been easy. 

Over the past few decades, Millennials have experienced:

• The 9/11 Tragedy
• The 2008 Great Recession
• The COVID-19 Global Pandemic
• The increasing burden of student debt

What makes matters worse, is that the 2008 Great Recession interfered when most Millennials entered the workforce and the COVID-19 pandemic occurred during most Millennials’ prime earning years. 

With those events in mind, it comes as no surprise that Millennial investors are pessimistic about the future. 

But – there is good news!

Millennials are not easily deterred from their retirement goal.

In fact, studies suggest that the majority of Millennials have a plan for their retirement, with a whopping 75% of Millennials stating they work with a financial advisor, as of 2020.

Because more Millennials are working with financial planners, they are building better – and customized – strategies to prepare against outliving and outspending their savings and investments. 

In fact, the average Millennial has saved about $166,430 in retirement accounts.

To help put this number in perspective, take a look at some findings from a Forbes article, which points out that the average retirement savings for families between 50 and 55 is $124,831.

Comparatively speaking, Millennials aren’t doing so bad.

In fact, studies suggest that Millennials are saving earlier for retirement, starting in their 20s, than previous generations, who waited to save for retirement until their 30s. 

However, there still remains much ambiguity as it relates to the Millennial retirement. 

Specifically, Millennials are concerned about outliving their savings and the dwindling Social Security trust fund. According to a recent AARP article, the COVID-19 pandemic has truncated the longevity of the Social Security trust’s assets, which is now expected to be depleted by 2030. 

While Social Security benefits will likely change drastically by the time Millennials hit full retirement age (which currently is age 65), there may still be hope that some version of Social Security benefits is still available to those who are in dire need.

Crafting a financial plan for Millennials so they don’t run out of money is an art rather than a straightforward formula. 

So what do Millennials have to do today to ensure a better retirement?

Let’s take a look.

How to Save More for Retirement

Before we dive into the strategies on how to save (and invest) more for retirement, first let’s take a look at how much you should be saving for retirement. 

Typically, it is recommended to save between 10% to 15% of your pre-tax (so your total) annual salary for retirement. 

Then again… you know what they say about average rules…

…Average rules are for average people.

If you’re a Millennial who is looking to achieve some of the following “above average” milestones:

• Early retirement
• Financial independence
• A luxury lifestyle during retirement

…Then it’s probably a good idea to practice “above average” habits. 

My goal is to crack the million-dollar marker by age 30, and although I’m well on my way, I know I have to keep pushing to make this goal a reality.

As a result, I’m saving and investing just over 70% of my gross annual income since I graduated university and started my first full-time job. 

The earlier you start investing, the more likely you’ll achieve your financial goals.

If you want to be above average, then you could aim to save (and invest) at least 30% to 50% of your gross annual income. 

Below are some tricks I’ve implemented to prepare myself for my retirement. 

1. Find a Roommate

What’s the largest chunk of change you pay every month?

For me, it’s my rent, utility, electricity, etc.

One easy way to save money fast is by finding a roommate. Ideally, roommates will pay up to 50% of your basic living costs.

Before you actually invite a roommate into your home, you’ll likely want to do some of the following precautionary steps first:

• Interview several roommate candidates 
• Vet your roommate (by calling references)
• Prepare and sign a roommate agreement contract

Make sure you’re 100% comfortable with your roommate before allowing them to move into your place.

It’s much easier to move them in than requesting them to move out.

2. Find a Side Hustle

Saving money has its limits. 

Earning money, however, is unlimited.

So, if you’re struggling to save more, then why not consider starting a side hustle so that you can earn a few extra $100 or $1,000 every month?

An extra $100 every month translates to:

• $1,200 every year
• $12,000 every 10 years

Who wouldn’t want an extra $1,200 every year? 

The sweet thing is that you don’t just have to earn money the traditional 9 to 5 employment route. 

You can earn money by monetizing your social media account or you can earn money by learning affiliate marketing. 

The point is, there is so much potential to make more money – you just have to find your niche, put some time and energy into your work, and be consistent with your efforts.

You’ll see results. 

3. Pay off High-Interest Debt

The Millennial generation has the fastest-growing debt out of any other generation. 

In fact, the average Millennial consumer has about $27,251 of debt – not including mortgage debt.

If you’re a millennial who is looking to retire early – or simply retire – then one of your first steps should be paying off high-interest debt, like credit card debt.

Billionaire investor Mark Cuban puts his own spin on credit card debt, when he says:

“If you use a credit card, you don’t want to be rich.” – Mark Cuban

While credit cards are sometimes a necessary evil to build credit for major purchases like a home or a car, the point is that you should pay off credit card debt ASAP.

Otherwise, you are robbing your future self. 

4. Use a Low-Cost Investing Platform

While the debt burden for Millennials has seen a generally increasing trend, evidence also suggests that the majority of Millennials practice healthy investing habits.

In fact, 88% of Millennials invest their money.

Regardless if you are investing $5 or $500, the point is to start practicing healthy investment habits early.

Especially as a millennial, time is on your side. The best time to invest is while you’re young.

This means the earlier you invest, the higher the chances that you build long-term future wealth.

Closing Thoughts

The last year has brought many unexpected and unprecedented changes to the world as we know it.

And this means Millennials will have faced multiple headwinds as they embarked on their journeys to retirement:

• The global pandemic 
• The 2008 Great Recession 
• The burden of student debt

On the bright side, there are strategies that Millennials can take today to prepare for a healthy retirement. 

Remember: that preparation won’t be a walk in the park.

It’s going to take:

• Patience
• Dedication
• Consistent action

The key is not to become discouraged if you don’t see immediate success. And chances are, you probably won’t see immediate success. Growing your net worth will take decades.

Focus on the big picture, and remember that consistent action will bring results. 

Your investment accounts will thank me later.

A huge thank you! to Fiona for writing this terrific article. If you want to check out more of her work, visit The Millennial Money Woman.

Check out more of The Best Interest’s content in our Archive or by Subscribing to get future articles emailed to your inbox.

And if you enjoy podcasts, check out The Best Interest Podcast! PS – Fiona was the guest on Episode 13!