Maybe it’s because this generation makes less money than previous generations did, or maybe it’s because Gen Y burns through cash without saving much of it. But either way, millennials are not prepared long-term. This generation is pushing back the big financial decisions in life like buying a home and establishing a viable retirement plan.
A new survey[1] from the Indexed Annuity Leadership Council (IALC) reveals that 15 percent of millennials have less than $25,000 saved. One-in-three millennials say they set aside no money for retirement and 24 percent say they owe more than they have saved.
Across all generations, Gen Y is the least prepared, but the most optimistic about the idea of saving for retirement. Most millennials think 401(k) when they think retirement, but with 401(k) plans becoming less fruitful, pensions dwindling and social security become less “secure,” they should be looking for other options. So what is becoming more popular with this generation? CDs, IRAs, annuities, cash under the mattress?
The IALC survey indicates that 52 percent of millennials are interested in annuities. So, what is an annuity? Think of it as a long term agreement between you and your insurance company. You pay one large sum or a series of payments over time and in return, you are guaranteed to receive future disbursements. Ultimately, the goal of an annuity is to retire with a steady, secure income.
Whichever method of saving for the future, most millennials acknowledge that the time to save is now. It could be as simple as $20 a month or a well-spent graduation gift, preparing the nest egg today will ease the transition from debt-burdened millennial to a comfortable retiree.
Since Gen Y seems to have little idea on how to start saving for their future, Jim Poolman, Executive Director of the IALC, shares some simple savings tips:
Every penny counts
When you’re young, you have time on your side, so put as much money aside as you can. This might mean skipping a night or two on the town.
Take Free Money
Consider contributing to your company’s 401(k) plan or any employer-sponsored plan. Think of any plan your employer is willing to match as “free money.” A 401(k) plan might not be enough for retirement, so consider other strong options such as a fixed indexed annuity.
Living Longer
Americans are living longer. They need a savings plan that works for them over the long haul, making annuities critical in helping provide the income they want and need.
Have an Emergency Fund
You never know when you’ll decide it’s time to leave your job, your employment suddenly ends, or you need some cash for car or health needs. Make sure you have a few months’ pay on hand in your bank account to help you through those unexpected times.
Fulfill your Dreams
Think about the life you want in retirement with an advisor – do you want to lounge in your backyard or travel the world? Based on your goals, develop a retirement plan that will suit your needs.
[1] The IALC survey was conducted with GfK’s Knowledge Panel
I am currently a 20 something year old student and the thought of my retirement and future has been coming up quite often in my head. Sometimes I have the mentality of, “I’m young and don’t need to save every penny.” I know I shouldn’t have that mentality though, especially since I really should be saving every penny!
I love this one! I totally regretted the time that I wasted for not saving money for my retirement. I totally agree that we need to develop a retirement plan that will suit our needs.