Retirement Planning Tips for Millennials

Published July 26, 2017
Getting ahead of retirement planning can help you achieve your goals sooner. Our retirement planning tips for millennials give quick and easy suggestions for people in their 20s and 30s. One thing to be most aware of: retirement is more complicated without a pension.
  • First retirement planning tip for millennials: having simple and clear goals make it far more likely that you’ll achieve them
  • Also, starting to save at an earlier age can help you reach your estimated retirement time horizon sooner
  • Lastly, retirement planning for millennials is harder since you don’t have pensions; here’s what to do about it

Retirement is years away, so why should you start planning and saving for it now?

Simply put, in order to prepare for the future, it’s important to start planning and saving now so you can easily achieve your retirement goals. By starting early you can maximize how effectively you’re managing your goals and when you need to adjust them.

And, even though you have time on your side, retirement planning for millennials is actually harder than it was a generation ago when everyone had pensions. So, you’ll need to be even more responsible than your parents were. Here are our retirement planning tips for millennials:

Retirement Planning Tips for Millennials

Below is a quick to-do list for what your goals should be leading up to retirement.

  1. Begin saving at least 10% of your salary – though if you can scrape 15% together that’s even better. If you’re not saving regularly, you’re missing out on tax incentives and the power of compounding interest.
  2. Look into employer plans, like a 401(k) or something similar. That’s the best place to start when it comes to saving. If your employer doesn’t offer some sort of workplace plan, consider a traditional or Roth IRA and contribute the maximum. Company matches and tax-deferred vehicles are a great foundation of retirement planning.
  3. Find a simple and low-cost investment plan. A simple, streamlined investment portfolio is easier to manage and less likely to yield major problems. All you need is a diverse, low-cost mix of stocks and bonds (usually via index funds) that line up with your risk aversion and your investment timeline. In your 20s and 30s that mix will probably look something like 80-100% in stocks and 0-20% in bonds.
  4. Relax a bit! If you’re saving regularly and investing simply and smartly, then you’re doing your part for these decades. All you’ve got to do is check in from time to time and keep an eye on your progress.

The Three-Legged Stool

The old retirement adage says that we should use the three-legged stool approach to prepare for retirement:

  1. Social Security – This is the government’s retirement plan for us. As long as you’re working and paying taxes, you’re earning Social Security credits. When you retire, you’ll start receiving monthly Social Security income that will continue for as long as you’re alive. Click here to learn more about Social Security.
  2. Pensions – This is the form employer retirement plans used to take. They provided a steady monthly paycheck no matter what happened in the market and no matter how long you lived. Because Social Security only covers, on average, 40% of one’s retirement expenses, people leaned on pensions for the rest.
  3. Personal Savings – So that you have access to money outside of, and beyond, monthly Social Security and pension checks, you need to save on your own. This money is generally invested differently to serve two purposes. First, money invested in liquid money market or savings accounts provides a cushion and access to extra cash in case of emergency. Second, money beyond that can be invested in the market for a high potential return. This is the money you’re comfortable losing.

The Broken Leg: Pensions

The problem today is that the second leg of the three-legged stool is wobbly or gone. Instead of offering pensions, employers are providing 401(k)s and matching contributions, which helps with the third stool.

At Blueprint Income, we exist to fix the broken stool. Our Personal Pension (an account of annuities) provides guaranteed retirement income like employer pensions used to, but this time it’s backed by insurers.

Here you can see what contributing to a Personal Pension will guarantee you in retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.

You can continue with the enrollment process on your own or fill out the information to have one of our specialists follow up with you by starting with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.

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Nimish Shukla

Nimish Shukla

Financial Planning Professional

Nimish has spoken with thousands of customers about retirement spending. As a CFA Charterholder and licensed fixed annuity producer he values the importance of building an income stream for retirement. In addition to his work at Blueprint Income he is also a regular contributor to Nerdwallet.