4 Things Millennials Should Do Today to Prepare for Retirement


The Millennial generation — those born between 1980 and 1995 — have it pretty tough. After starting their careers in the worst economic downturn in a century, they're now being blamed for everything from shopping on Thanksgiving to their own unemployment rates. (If it makes you feel any better, you should know that they used to blame everything on us Generation X kids, too.)

And they face a tough road to retirement, too. Various economists and experts have crunched the numbers and decided that at best, Millennials won't be able to retire until age 73, before keeling over at 84. The reasons are obvious: Student loan debt is at an all-time high of $1.2 trillion overall, with the average college graduate finishing school nearly $30,000 in debt as of 2013. Employment has been tough to come by for this generation, and even those lucky enough to have a job earn less than their parents did at the same age (adjusted for inflation).

But this is also an extremely resilient generation that has learned to get ahead in tough times. Here are four things that Millennials (not to mention Gen-Xers and Boomers) can do today to prepare for retirement:

1. Open an IRA

For the most part, Millennials who are given the opportunity to invest in their company's 401(k) do so. According to polls, 70% of Millennials are already saving for retirement, which is a huge accomplishment.

Where things get tougher are when young workers do not have access to a retirement vehicle at work. That's why it's a great idea to open an IRA (whether your employer offers a 401(k) or not). No matter the vagaries of your career, having an IRA will always provide you with a retirement vehicle that you can invest in.

What kind of IRA should you get? Look for one that offers no-load mutual funds. No-load means you are not paying a commission on your investments, so you keep more of your money.

2. Automatically Transfer $10 Per Week

This kind of advice sounds like something your grandmother would tell you to do, but Nana has the right idea. Automating your savings is the best way to get into the habit of setting money aside, since you don't have to think about it. Starting with a low amount that you are unlikely to miss is an excellent way to build your retirement account.

This small action can make a huge difference. After 35 years, your weekly $10 contribution can grow to $76,915.00, assuming an 8% rate of return. If you increase your automatic transfer rate each year to reflect your raises, that growth will be even more impressive. And all from an amount of money you probably won't even notice is missing.

3. Embrace the Side Hustle

More than their parents or grandparents, Millennials recognize that there is no such thing as a dream job — that is, the one true job that will provide fulfillment and compensation beyond one's wildest wishes. That's partially because many members of this generation have had to cobble together employment from multiple opportunities just to keep the lights on.

But getting in the habit of working for several employers is not just good for your current bottom line — it's potentially good for your career and your retirement prospects, too.

That's because your side hustle can help you with networking and time management, which will help your main career. In addition, maintaining multiple gigs can help you weather any financial or career setbacks. (See also: The 4 Best Micro Job Sites)

But most importantly, working a side hustle can help you to redefine work — which will be helpful in the future when retirement is less likely to look like the blank space between the end of your career and death, and more likely to be a different chapter in an interesting life. No matter what you do with the money from your side hustle (hint: invest it!), embrace the idea that there are many things you can do to make money and feel productive.

4. Split Your Windfalls

Many of us have a tendency to spend unexpected windfall money on fun purchases. But start getting in the habit of splitting your windfall money between your splurges and your retirement accounts. The splurge-to-retirement account ratio is up to you (although 50/50 is generally a good idea), but starting to think of windfalls as a gift to both present and future you is a great way to enjoy that money twice — which is even better than spending it all on a shopping spree today.

The Kids Are Alright

It's human nature for every generation to give the next one a hard time. And the pundits who warn of the sky falling for Millennial finances aren't making things up. But they are ignoring all of the things that Millennials have going for them: The experience of watching their parents lose money during the 2008 downturn, a sense of personal responsibility for retirement, and plenty of time.

There will come a time when financially secure Millennials will be the ones worrying about the whippersnappers who come after them. Let's just hope the Millennials will be able to keep the hysterical rhetoric to a minimum when it's their turn.

What are you doing now to prepare for retirement?

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