Generation Y’rs are considered the future of retirement planning. That being said, for many of them retirement isn’t on their minds and therefore they tend not to save as much money as they should.
A recent survey found that 31% of Gen Y does not prioritize retirement savings. In fact, 41% of the 720 respondents between the age of 20 and 31 said their top reason for saving was for vacation and travel, according to LIMRA, a research, consulting and professional development organization. The primary reason is that for this age group, current lifestyle is their No. 1 concern.
Calling Generation Y! Here are a few tips to help you for the future:
- Consciously Save– figure out a plan on how to put away money from your paycheck. Each time you receive a paycheck, take a portion and put it into your savings account. Treat that savings account as if it is a retirement account and you can’t touch it. As that account grows, seek advice on how to invest that sum of money for growth.
- Longevity- you have a long time horizon based upon your age. Understand that by saving now, with the benefit of compounding (earning money on your money), your pot of money has a long time to grow. You are the envy of every 60 year old who is now first saving for retirement – don’t look back 30 years from now and say “I should have…”
- Investment Choices– don’t be overly aggressive. Picking individual stocks just because your friend learned of a tip is no way to invest. Do your own research or hire a financial advisor and make sure you have a clear set of financial objectives, a personal financial plan and a diversified portfolio that meets your risk tolerance and goals.
- Watch for Fees– look out for high transaction cost, loaded mutual funds, and high commission based brokers. If you want to hire a financial advisor, it is suggested that you retain a Certified Financial Planner (CFP) who is a fiduciary and is fee-only (non-commissioned based). Note, only 17% of all Gen Y consumers are currently working with a financial professional, according to the LIMRA survey – this is a very low percentage that presents a great risk that Gen Y will continue to struggle with its retirement planning needs.
Point of the story: If you start saving now as a Gen Y, and you invest wisely in accordance with a plan, you are definitely ahead of the game!