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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
It cannot be stressed enough that saving for retirement is a must. However, millennials are holding off due to high student loans and poor paying jobs. If your company offers a 401k plan, use it! Otherwise, start your own IRA. The sooner you start, the better off you will be. Why Millennials Need to Focus on Saving for Retirement By Britt Erica Tunick When it comes to saving for retirement there is no such thing as starting too early. Many millennials (born between the early 1980s and early 2000s) are so focused on paying off student loans that they are not setting aside for retirement. Millennials should see if they can reduce the amount they need to pay toward loans in order to invest even a minimal amount for retirement. Even the smallest savings has the ability to become significant due to compounded interest. Consistently reinvesting interest earned by an investment vehicle can help a small amount of money grow by leaps and bounds. A 22 year-old who invests $100 monthly into a saving account yielding a set 3% until age 67 (the current full benefit age born in 1960 or later) would have $113,442 at retirement. Meanwhile, a 40 year-old who doubles that investment, putting $200 into an account yielding a fixed 3%, would have only $50,086 at retirement. A recent study by North Star Opinion Research for Young Invincibles, found that only 43% of millennials who work for employers that do not offer sponsored retirement plans, such as 401(k)s, are consistently setting aside retirement money in savings vehicles such as IRAs. Since many employers who offer sponsored retirement savings plans tend to have some sort of matching element in place, the gap between the retirement savings of millennials who are saving through work sponsored plans and those not saving at all could be dramatic when this group reaches retirement age. Anyone with millennials in their family should encourage them to begin saving for retirement. Even though interest rates remain very low, they cannot remain at these current low levels forever. The sooner they invest, the greater the benefit. |
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