How long do you plan to be in the workforce? Does retirement sound like a distant dream? How much money would you like to have tucked away for retirement? If you’re a millennial who has no idea how much money you need to retire and when you plan to leave the workforce, your retirement date may be later than expected.
According to research conducted by Aon, 2 in 3 workers will not have enough saved to retire comfortably by age 67. While many baby boomers and Gen Xers will be able to retire in their late 60s, most millennials won’t be prepared for retirement until age 70 or later.
Reports show that nearly 40% of young adults believe saving for retirement can wait. “Many millennials just starting out may struggle to balance paying down debts and saving money, especially for retirement,” said Julie Wilson, head of research for Navient, in a press release that shared the findings of the study of 3,000 millennials aged 22 to 35.
Instead of saving for retirement, millennials are prioritizing goals that bring instant gratification such as homeownership, paying down debt, building an emergency fund, and saving for a vacation.
All of these choices come with a cost—some more than others. If millennials continue to prolong their retirement strategy, they will be forced to stay in the workforce longer than their parents.
What’s the solution? A simple conversation. The grim retirement numbers alone won’t get millennials motivated about developing a strategy but a conversation with a friend, family member, financial coach, adviser, or retirement planner can be life-changing and put things into perspective.
The reluctance to talk about personal finances and retirement goals on a regular basis in the black community is putting us at risk of not being financially secure during retirement. Money can’t be a taboo topic anymore. It has to become the norm in order for us to reach the levels of financial independence we hope to achieve.
In order to adequately plan for retirement, you need to know how much you should contribute, the best way to allocate your retirement funds, and the best strategies to meet your desired lifestyle goals. Sitting down with a finance or retirement professional can bring some clarity to one of the most important decisions you have to make during your lifetime.
“The generic default of a 3% contribution rate for retirement, used by many employers, is woefully insufficient and ill-fitting for most American households,” reports Stephen Wendel, Morningstar’s head of Behavioral Science at the 2018 Morningstar Investment Conference. “The right answer isn’t a new default: it’s a personalized analysis of what each household needs. Americans pay the price for not having advice tailored for their needs.”
In Wendel’s article, he points out that financial planning, investing, and investing behavior can increase an individual’s retirement readiness. Morningstar researchers note that all of these tools are most effective when more than one is implemented at the same time. If you are looking for the perfect combination of actions to take, personalized financial advice is essential to your success.
Most importantly, start taking action now. Or you’ll have to pay for it later by working longer.
Black Enterprise Contributors Network