Why You Should Be Thinking About Retirement as a Millennial
Hey everyone! This is a guest post by Holly Whitman over at Only Slightly Biased. Holly is a freelance writer and a journalist by profession.
Forming a sentence with the words “retirement” and “Millennial” is pretty difficult. The two aren’t synonymous in any way, as one word signals the end of your working days while the other is usually a marker that you’ve reached the age at which careers are born.
However, it’s more important than ever for young adults to begin thinking about retirement, as early as graduating from college and beginning their careers.
The average age of retirement is 63 years old. Millennials are young adults ages 16 to 39, which allows 24 to 47 years, on average, to save up the money you’ll need to retire.
This seemingly massive amount of time makes it easy to put off saving for your retirement, especially when you’re below the age of 25, and you’d be amazed at how many young professionals don’t take their retirement savings seriously.
Unfortunately, doing so is a big mistake that could end up costing you your retirement altogether.
It Takes a Lot of Money to Retire
It’s safe to assume that you want to retire comfortably. That necessitates a certain amount of money being saved throughout your career in order to achieve such a goal.
Of course, the magic number won’t be the same for everyone. Variables such as anticipated lifestyle choices during retirement or how much of your income you’re able to put into savings are certainly critical.
It’s also important to consider how long you’re planning to be retired. Some people enjoy 15 years, while others sign off for 30.
Take all of these factors into consideration, and then adjust the amount of income you expect from your savings to reach your “retirement number.”
For example, if you plan to retire for 30 years and withdraw $5,000 per month, you’ll need $1,060,751 in your savings when you retire.
This figure is theoretical, and takes annual investment returns and inflation into account. But it’s still a good measuring tool for you to use when planning your own retirement.
The bottom line is that it’s never a bad idea to know how much you’ll need in retirement, and then planning for that number.
One of the most common misconceptions about retirement is that you’ll live off of less money than you did when you were working.
Some of the logic makes sense — for example, you likely won’t drive as much, therefore lowering your gasoline expenses.
However, this isn’t sound logic.
Studies have shown that 35% of people spend the same amount of money in retirement, while 14% spend less money and 12% will actually spend more money.
You can’t depend on a drastic change in lifestyle once you’re retired. You still have to eat, remember?
The whole point of retiring is being able to enjoy life without working in order to survive, but instead working on occasion when you feel like it.
Retirement is supposed to be your transition out of the stressful working world.
Start Preparing Now
The average 50-year-old has $42,797 saved, which comes nowhere close to the $1 million a 30-year retiree would need to live comfortably.
It’s time to start saving. One of the biggest purchases you’ll make in your lifetime is your car, and your choice could be the difference between starting your retirement fund when you’re 25 years old and when you’re 45 years old.
Adjusting the prices for decades of inflation, Baby Boomers spent an average of $12,600 more on their first car than Millennials do now.
Conversely, however, the vintage cars that Baby Boomers owned back before the 1970s are worth far more money on the market now than Millennials’ first cars.
If you have inherited a vintage car, such as a 1967 Pontiac Firebird Trans Am, you might consider selling it. The Firebird has a 2016 market value of over $136,000.
If you don’t have access to a vintage car, don’t buy one if you’re planning on working until you’re 80, or not eating while you’re retired.
Most of the popular first cars that Millennials purchase go for $9,000 or less.
And if you do your research and find a very sturdy and reliable car for less than $9,000, or (if you’re really lucky) even less than $5,000, you’re basically tossing money right into your retirement pot.
It’s never too early to get started, even if you can’t afford much beyond $25-50 a month right now.
Student loans and living costs are extortionately high for Millennials, but thinking and planning ahead will benefit you long-term, so get saving today.
Are you saving for retirement? Are student loans holding you back from saving for retirement?
Holly Whitman is a freelance writer and journalist, tackling global issues from human rights to the economic downturn’s impact on millennials. She blogs at Only Slightly Biased and can be found on Twitter at @hollykwhitman.