Retirement Essentials Millennials Need To Know

Retirement Essentials Millennials Need To KnowMillennials are starting to increase in number in the workforce and they would greatly benefit in knowing some retirement essentials. One reason for this is that there is a good chance old age planning is way outside their radar. They have some immediate concerns to think about such as paying off massive student loans and looking for a job.

However, retirement planning should form a big part of an early strategy in a bid to strengthen finances and be in a position to chase your dreams. Huffingtonpost.com shared that in 2015, millennials became the largest segment in the country overtaking all other groups. This makes financial planning all the more important. If you are a millennial and want to achieve a certain level of financial stability in the future, your retirement strategy needs to be set early on.

There are some people who would be quick to point out that millennials may not be as smart as other generations. However, there are a lot of positive traits millennials have that are slowly changing the workplace. As they continue to make a difference in the world, they need to start planning ahead and this is where retirement essentials can come in handy.

If you are a millennial and want to look into retirement essentials that would be helpful in the future, here are a few things to look into and consider.

Start early

One of the biggest threats to your retirement fund is time. If you are a millennial, there is a good chance that planning for old age expenses is not your priority. But think of it this way – if you planned for your student loans early on, you would not have to take out such a large amount. Wouldn’t you want the chance to get it right for your future needs?You also would find it almost impossible to take out a loan meant for retirement like you were able to take out student loans for cost of attendance. The best thing to do is to save up and save up early. If you are a millennial, time is on your side. Your youth gives you a longer time to save up. This can allow your money grow for a lot longer time giving you a big amount at the end.

Take advantage of a company matching program

When was the last time you got some free money for doing something you should have been doing in the first place? If you are able to take advantage of a company matching program, that is essentially free money that your employer is giving you. This is when your company matches your contributions to your 401(k) every year.

They can be matching your contributions dollar to a dollar up to a certain amount every year. This means that if you are contributing $4,000 every year, your employer is adding the same amount. That is $4,000 additional in your retirement fund simply by saving. You do that every year and let compound interest do the rest.

Here is a quick video to help you understand how a company matching program works.

Starting a ROTH account is one of the retirement essentials for millennials

You should never rely on a single stream of income and that applies to your retirement fund as well. That being said, you need to augment your 401(k) with other funds for retirement such as an Individual Retirement Account of IRA. As a millennial, you can look at a ROTH IRA. As explained in Rothira.com, the money you put in here is taxed making future withdrawals tax free.

The reason this makes a lot of sense for millennials, especially for those that are just starting in their career, has a lot to do with tax. Regardless whatever type of retirement fund you consider, tax payments will always be part of it. What you are trying to do is to pay taxes while your bracket is still low because, in theory, you are just starting out. This can be a great help especially if you foresee your income and tax bracket going up in the coming years.

Consider increasing risk in your portfolio

This is not something you would hear every day but being a millennial, you have one big asset on your side – time. If you start saving up for retirement early on, you have the ability to weather any drops in the market. You can let your investments stay there and wait for the market to come back up. Investing early and taking on a high risk with high yield investment can pay off in the long run.

This is definitely one way to positively impact your financial position. This is because of the bigger the yield, the bigger your savings is. However, one of the retirement essentials you need to remember is to taper of risk as you get older. You need to remember that as you age, it would be harder to recoup losses compared to when you are just starting out.

Put together a plan

You do not need a thorough retirement plan the first time you put together a strategy. The idea is to have a long term goal to aim for. As you progress, you tweak your approach and firm up your plans as you go along. This way, your long term goal remains fixed while you have a moving strategy that changes over time.

If you want to retire at age 50, you need to work your way backward to your present age. This gives you an overview of what you need to be saving up every year to retire at an age you want. As you save up this amount, you could have good years and bad years. You now can make adjustments on what your annual savings need to be while keeping your eyes on the main goal.

Do not forget other funds too

As you strategize your finances to incorporate retirement plans in your budget, you have to make sure you do not forget other funds. One example is your reserve funds. This includes your rainy day fund as well as your emergency fund. These funds would help you address any unexpected emergencies that could come your way.

The earlier you get started with your emergency fund, the sooner you can set it aside and focus on other things. You just have to monitor the amount and make sure that whatever you take out for emergencies is put right back in for future need. This way, you are covered for any and all eventualities. It can also help you steer clear of taking out debt just to cover for an emergency. This is because taking out a loan to cover of an emergency will only compound your problem even further.

As a millennial, there are a few retirement essentials that you need to look into to take advantage of your youth. You have the time to make your money grow as well as take on a little more risk. You just have to remember that starting early would allow you the freedom to choose when you want to retire. Not when you have to retire because you are still building up your retirement nest egg.