4 Smart Retirement Strategies

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The recent recession, coupled with the sluggish economic recuperation, has been hard on many young Americans.  The young group known as the Millennial generation are graduating college with enormous student loans and inadequate options for a job that makes the most of the knowledge and skills earned at school.

While this paints quite a bleak picture of the immediate financial future for some Millennials their retirement prospects are even worse. Studies show that the typical recent college graduate won’t have enough to fund retirement until the age of 73 Right now the age of retirement is 61 – a 12 year difference.

“Retirement may seem like it’s way off in the future for these young folk, but the sooner they start to put away money for retirement, the better of they’ll be,” states David Lerner Associates Executive Vice President Martin Walcoe. “They have time on their side and should take full advantage of that extra edge.”

Here are four retirement planning tips for Millennials to help them with their retirement savings plan:.

1. Understand financial basics.  Just 18 percent of Millennials in the 18-26 age bracket answered 4 or 5 out of five questions correctly on a standard financial quiz, according to the Financial Ability of Young Persons report by the Financier Education Foundation. Older Millennials, aged 27-34 did only marginally better – just under a third of them scored higher than 80 percent on the test.

Low financial literacy is a serious issue for these young people because, unlike their parents and grandparents who had a pension, Millennials have to fend for themselves when it comes to investing for retirement. “They will have to make the decisions on how to invest funds in an Individual Retirement Account or a 401(k) plan.”

2.  Start saving right now. The greatest benefit young people have when it comes to conserving for retirement is time. “So, use this advantage by starting to conserve for retirement now,” Walcoe prompts.

A twenty year-old can create a retirement fund of $1 million by age 65.  All he has to do is steadily and consistently save $361 a month. (that’s at a rate of six percent typical annual return). By age 30 that figure goes up to $500 a month and by 35 he will have to put aside $699 a month to reach $1 million by the time he is ready to retire.

3. Handle Your Debt. Millennials are often saddled with student loan obligations. On average, student loans today run at about $23,000.  Just as compounded interest can help your savings grow,  so too can debt mount up if you don’t pay it off as fast as you can. An average student loan debt can cost more than $115,000 by the time you retire.

Credit cards operate on the same principle.  If you just pay the minimum amount on your card each month you will find that you end up paying much more than the amount you initially borrowed.

4. Don’t depend on Social Security.  Social Security as we know it today may not be there when the Millennial generation retires. They have to provide for themselves. The Wells Fargo survey shows that more than a third of these young Americans don’t expect to get any retirement income from Social Security, but it may come as a shock to the other two thirds.

Even if, as one expert suggests, Social Security is still available to Millennials when they retire, the benefits are expected to be lower and the retirement age higher.

The best course of action is to start saving as soon as possible, be consistent and make sure that you have a nest egg in place when it’s time to enjoy your retirement.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC .
Read more retirement articles at http://news.davidlerner.com

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