When retirement planning is mentioned, your mind probably goes to those who are close to retirement. However, the audience interested in retirement saving plans and investments is changing to just about everyone, as millennials, and even Gen Z, are now investing in their far-off future.
The idea of saving for retirement when it’s so far off is a challenge, but in reality it has become a need of the time. There are some compelling factors and reasons behind this trend, but altogether, retirement saving at young age reaps greater monetary advantages.
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Reality Check: Facts & Figures
Retirement saving at early age is both a challenge and opportunity for millennials. It is important for them to start saving because social security funds and pensions will no longer be reliable. A decline has been seen in pensions, and future of social security funds is also uncertain. This ambiguity is enough to understand the importance of saving at early age.
Nevertheless, it is an opportunity too. Instead of these indefinite and unreliable options, young adults can now secure their future with better retirement saving plans such as 401 (K).
Reuters reveals that if a person, 25, begins to contribute 6% of salary along with moderate investments, he will have 34% more savings in his account as compared to an investor who starts contributing at 35. Also the former will have 65% more in his/her account than an investor who begins to contribute at 45.
According to another recent study, 30% college and university going youngsters are taking retirement savings seriously and thus saving enough for their retired lives. Post graduates, comparatively, are saving less.
The report also reveals that 50% of 20-year-old employees understand the importance of saving and 64% consider it significant personal responsibility to save for their retirement.
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Suggestion for Young Savers
If you're a young saver or know one, apply these tips to get the most out of your financial future.
Don’t Use Credit Improperly
Credit isn’t a retirement savings plan, but its correct use can contribute a lot in your accumulated retirement saving. Youngsters should try to maintain a good credit history which is possible if they do not exceed the credit limit on their credit accounts, pay bills on time, etc.
Credit card companies bombard college students with a large number of offers for credit cards. Though it is convenient to have a credit card, youngsters are likely to use it excessively and for even basic necessities. It's important that they evaluate the offers and understand the pros and cons of every offer, and pay off their balance every time.
Regular Financial Analysis
Young savers should conduct assessments of their financial and spending habits, particularly ones that impact their budget. It is also important to keep track of changes in interest rates, recurring expenses and fiscal responsibilities.
Refinancing Mortgages at the Right Time
Young homeowners should be aware of when they should refinance mortgages. Most of the time, it is important that a mortgage is financed when current interest rates on mortgages are lower than the interest rate they receive on their current mortgage.
Cost of living changes with time. It is, thus, significant to evaluate your budget again. This assessment allows youngsters to determine where they need to control their expenses and how much income is required to live a life they desire.
For a secure future and adequate retirement savings, it is essential that money management skills are developed earlier in life. The more responsible a young saver is, higher are his retirement savings.