Being a Millennial isn’t easy these days. Burdened by massive student loan debt and higher unemployment rates than their Generation X or Baby Boomer counterparts, millennials are having a hard time establishing a firm financial footing.
A survey by GOBankingRates found that 72 percent of adults between the ages of 18 and 24 years old have less than $1,000 in their savings account. For those aged 25 to 34, the number improves only slightly to 67 percent. Perhaps even more disheartening is that 33 percent of those in that age group confessed to having no balance in their savings accounts.
The research shows that millennials need to start adopting a savings mindset if they plan to retire someday, particularly since they may not have income from Social Security to rely on.
Now, here’s the good news: if Millennials start saving now, they will more than likely have more money in retirement than Gen X, whose members are busy playing catch up with their retirement accounts after two brutal bear markets over the last 17 years.
Here are some goals for Millennials to strive for to help achieve a better financial future.
Even implementing a few of these items will go a long way towards securing a strong retirement.
- Pay off the debt on time. This will help you avoid paying double-digit interest on credit cards, which is often the result of late payments. Second, pay down those old student loans as fast as possible. The interest rates on them are just too high. Consider taking an annual work bonus or any other windfall and apply it immediately toward paying off all your student loan debt.
- Contribute as much as possible to a 401K plan. If you can afford to contribute 10 percent from your paycheck every month, do it. Remember that any contributions will help reduce your taxable income – a great incentive for saving. If you contribute to a 401K every two weeks, you are dollar cost averaging your way into the stock market all the time, which is how you can take advantage of down or bear markets. An added bonus is that your employer should match at least a portion of every paycheck, which is free money.
- Consider opening a Roth IRA. If you can, contribute the maximum amount of $5,500 a year. The best thing about a Roth is that when you withdraw this money after age 59½ it is completely tax-free, unlike the withdrawals from a regular IRA, which get taxed as ordinary income. This is a huge advantage. At some point in your career your earnings will disqualify you from fully contributing to a Roth IRA, which is limited to those earning $133,000 as a single head of household or $196,000 for married couples. At that point, you can open up a regular IRA and have both retirement accounts.
If you can manage to do most of the things on this list, you will be way ahead of the game and able to take advantage of the compounding magic of money over a very long period of time.