Financial Advice for Millennials
The need for money, now and for the future and how to get it-how to keep it.
The first step in the process to financial independence is to define what we want to accomplish.
There will be more than one way to achieve our objective so we need to evaluate the options.
We now need a framework for the program, putting a plan together.
Now the most important step, follow and stick to the plan
A look at the present problem is that Millennial families with kids, bills, mortgages and limited real job security are not putting enough aside for the future.
According to this survey by the Transamerica Center for Retirement Studies shows that, as of Aug 1, 2019, the median retirement savings by age for Americans hardly met retirement needs.By age in the US shows:
Americans in their 20s: typically saved $16,000.
Americans in their 30s: bumped that up to $45,000.
Americans in their 40s: reached a maximum of $63,000 in retirement income.
That’s not nearly enough. No way, no how!
According to Fidelity Investment this formula is suggests the following financial goals:
Aim to save at least an amount equal your salary by age 30. If you earn $50,000 per year plan for savings of $50,000. By age 40 plan for savings of three times your salary, which assuming for our purposes your salary remains $50,000, is $150,000. By age 60 as you get closer to retirement, you need a higher figure. Plan for 8 times your salary or $400,000.
Assuming you retire at 67, this plan will allow for a retirement sum of one million dollars.
You can see that this is a more realistic financial picture for a future without other income.
Those who didn’t set and achieve future retirement needs are now of retirement age and find that retirement for them is only a dream.
The number of those over age 65 and working has increased to 20% of the workforce- double the number from 1985. (Link)
Suggestions for a retirement portfolio.
- If you have the option of a 401(k) plan contributing as much as permitted will add significantly to your retirement nest egg.
- Increase your workplace 401(k) contribution percentage whenever you get a raise.
- Be sure to get all the employer matching contributions. The employer often will contribute as much as you do. It’s like getting a raise.
- Max out those contributions- you are being paid to do it. What you contribute reduces your taxable income.
- Establish a Personal IRA- An Individual Retirement Account. It’s never too late to save for retirement, even starting at a later age. It all helps.
- Make catch-up contributions when becoming age eligible. Those who delayed contributing an adequate amount are encouraged to contribute more than usual when they reach a certain age.
Where to put your money
Many say that investing in the capital markets like stocks and bonds should produce significant gain, so that the growth in assets would result in an increased lifestyle or in a more comfortable retirement.
Others would say buy a home and watch it appreciate in value.
Some say invest in a small business and keep it growing.
What about gold, silver and other precious metals?
Consider that no income is produced with most gold and silver funds.
Some people with long term savvy suggest that gold and silver will be a natural offset to the obviously looming inflation. Investments in gold and silver either in hard form or in a gold or silver index fund might have merit but be careful of volatility and of course the lack of current income.
What about a savings account?
Should putting money in a savings account be encouraged?
Unfortunately, the interest income on such an asset may not even keep up with inflation.
Maybe you should become a landlord?
Direct ownership of income real estate may be attractive, as are Real Estate Investment Trusts (REITs). Many folks are buying two and four unit buildings and plan to live in one of the units. Low mortgage rates currently make such an investment popular for many people.
Research is obviously essential. Help is available from community and non-profit programs seeking to assist families and individuals.
For those looking for an epiphany, sorry, no short answers here- Preparation is the rule of the day.
Summary:
- Begin right now to define all the goals in your life- Write them down
- Determine the financial needs for fulfilling the goal
- Evaluate the best methods to satisfy those needs.
- Execute the plan and stick to it.
Thanks for reading.
JP Carsten is a retired professional Certified Employee Benefit Specialist. He spent the major part of his career administering the pension and benefit programs for 15,000 health care professionals. As a volunteer, He was involved in educating hundreds of corporations and groups as to benefit plan administration. He has also been a volunteer Emergency Medical Technician.
He is past president of the International Foundation of Employee Benefit Plans and past president of the International Society of Certified Employee Benefit Specialists.
Mr Carsten now calls Kauai, Hawaii his home.
