For many Millennials, retirement seems like a far-off goal, making it hard to focus on saving for it. But as time passes, that distant future creeps closer, and the realization of being unprepared can hit hard.
If you feel behind, you’re not alone. According to a recent CNBC survey, 52% of Millennials say they are falling short in their retirement planning, often due to prioritizing debt repayment over savings. While it may seem overwhelming, building a solid retirement fund is achievable by taking small, consistent steps.
1. Visualize Your Retirement
Saving for retirement can feel unimportant if the idea of retirement itself feels vague. The day-to-day grind can make it hard to picture what life might look like without work. But taking time to imagine your ideal retirement can help you set realistic financial goals to make it a reality.
Do you dream of traveling the world or envision quiet days at home enjoying your favorite hobbies? Are you planning to support charities or care for loved ones? Your vision for retirement will determine how much you need to save.
For example, if you’re a homebody, focus on ensuring your home is paid off or saving enough to cover housing costs. If you plan to travel extensively, aim for a larger savings goal and consider sources of continuing income to fund your adventures.
2. Review Your 401(k)
Your 401(k) might feel like a background feature of your finances, but it needs regular attention to grow effectively.
First, ensure you’re enrolled in a 401(k) if your employer offers one, or set up a solo 401(k) if you’re self-employed. Then, check how much you’re contributing and explore ways to increase it. Did you get a raise this year? Great! Allocate a portion of it to your 401(k). If your employer offers matching contributions, make sure you’re contributing enough to receive the full match — that’s essentially free money for your future.
3. Diversify Your Retirement Accounts
While contributing to a 401(k) is a great start, relying on just one type of account can limit your financial potential. Diversifying your retirement savings can provide more options and stability.
Consider opening an IRA (Individual Retirement Account), either traditional or Roth, for added tax benefits. If you have access to a Health Savings Account (HSA), it can be a useful tool for covering future medical expenses while also growing your savings. For predictable income in retirement, you might explore annuities as a low-risk option to supplement your savings.
4. Be Smart About Spending
Rising costs and lifestyle inflation — when spending increases along with income — can make it easy to put retirement savings on the back burner. Take an honest look at your spending habits to identify areas where you can save.
Start by tackling high-interest debt, like credit cards or loans, to free up money for retirement savings. Building an emergency fund can also prevent you from dipping into retirement accounts during unexpected expenses. Keeping your savings untouched ensures they’re ready when you need them in the future.
Staying Ahead Is Possible
More than half of Millennials feel they are behind on retirement savings, but you don’t have to stay in that group. Start by imagining the lifestyle you want in retirement, keep track of your 401(k), explore additional savings options, and take control of your spending. Leaving the 52% behind is entirely achievable — one step at a time.
