As a generation, Millennials seem to be in a financial juggling act. Most already have established careers, but they are also balancing mortgage payments, starting a family and paying off student loan debt.
Given all of this, it’s no wonder some Millennials struggle to save for retirement. It can be difficult to commit to setting aside money for the future when there are more pressing financial needs to tend to right now. That’s why we asked Forbes Finance Council members to share some retirement planning tips for Millennials. Here’s what they had to say.
1. Automate Your Savings
When juggling so many different expenses, it can be really easy to overlook putting some money into savings or retirement funds. Set up an automated draft from your paycheck that goes into a savings account and/or IRA account so that you are putting something away for your future. Automating this process means you’ll never even see the money—it will be quietly working away toward your future. – Danielle Kunkle Roberts, Boomer Benefits
2. Understand The ROI Of Your Expenditures
View all cash expenditures as investments. If you have any debt, prioritize paying off the highest-interest debt, which is often credit card balances. Mortgages tend to carry low interest rates, so it’s worth taking on debt there so you have more cash to pay down student debt or invest. When making purchases, be cognizant of sales. Buying on Black Friday is one of the best investments you can make. – Carlo Cisco, SELECT
3. Prioritize Wealth Growth Over Debt
A strong emphasis on utilizing retirement savings vehicles, like the 401(k), will get that snowball rolling for wealth growth. Don’t neglect your debts, but if you focus on debt annihilation you may find there is nothing to fall back on if life throws a curveball. Enjoy compounding growth! – Faith Keith, Leverage Retirement
4. Take Advantage Of Your Employer’s 401(k) Match, If Offered
If your employer offers a 401(k) plan, if applicable, are you taking advantage of the company match? If not, while it may be a struggle at times, it’s almost imperative you’re investing enough to at least get the full match. Compounding interest from this “free money” can add up significantly over time. – Gregory Ostrowski, Scarborough Capital Management
5. Slowly Increase Your Savings Over Time
As life expectancy is steadily increasing, previously established retirement ages might no longer be accurate. Also, cost-of-living expenses have steadily been rising. Therefore it is important to develop a habit of saving early while slowly increasing the amounts that are being allocated to retirement. The mix of investments should move towards blue chips later in life and finally into bonds. – Christian Kameir, Sustany Capital
6. Understand Simple Interest Versus Compounding Interest
Understanding simple interest rates, versus a compounding rate, is key. For example, mortgage interest is “simple” and set from day one—it’s spread out over time, but it won’t change or increase. Retirement savings have compounding interest, meaning 2+2=4, 4+4=8, 8+8=16 and so forth. Compounding interest can be very powerful, both for growth instruments and also for debt liabilities. – Matthew Cuplin, Midwest Financial Group
7. Build The Habit Of Saving
When there isn’t a lot of money to contribute to a 401(k) or IRA, some Millennials neglect it, since financially it won’t make a big impact. However, even when the contributions are small, it will still help you build a positive habit that will make it easier to contribute a larger amount later. Start with a small percentage, which won’t even feel like a hit to your finances, and slowly increase it! – Vlad Rusz, Centaur Digital Corp.
8. Watch Out For Fees
Time is on your side, but that can work for or against you. Investing in a mutual fund that charges a hefty 1% fee can work to your detriment over time. For instance, a $1,000 investment that would turn to $12,000 by retirement age would, instead, be worth only $9,000 after factoring in 40 years of fees. To avoid making this mistake, look for low-fee (i.e., less than 1%) investment funds. – Tyler Gallagher, Regal Assets
9. Consider All Your Options
As companies shift from defined benefits to defined-contribution plans, know your options to create your plan. Consider contributing to a 401(k) through your employer and/or an IRA (or both!). Pay attention to matching offered, and contribute enough to fully utilize match benefits. If you’re self-employed or your employer doesn’t offer a retirement plan, consider opening an IRA on your own. – Steve Allocca, LendingClub
10. Pay Yourself First
Yes, we need to pay all creditors and spend money on necessities and hobby-related items, but do not forget to pay yourself in the form of saving for your own retirement. There are many ways to do it, and you can start with a small amount for retirement savings. You need to start early—otherwise, you’ll have to save a substantial portion of your income later on for your retirement. – Neil Jesani, BeamaLife Corporation
11. Continually Educate Yourself
Do not just rely on a financial planner or a family friend. Read articles and magazines that help you to understand how to best invest your savings. Yes, every little bit that we save does help over time, but paying fees for those savings add up over time as well. Whatever is the easiest is going to cost you the most! Do not just choose the estimated retirement date plan. – Anthony Carr, United Wound Healing, PS