Benzinga
Here’s what it took to help my Generation Y colleague plan her Nest Egg Million Dollar
I am a nosy person, so I elbowed my millennium colleague Jessa in the next cube and asked her, “Pssst … How much do you save for retirement each year?” Instead of ignoring me, she furtively loosened up all her financial details (it was like a giant ice cream sundae for a finance nerd): * Jessa, at 28, still owes $ 15,000 in student loans, and her husband, who is 30, still owes $ 20,000. * They owe $ 12,000 in auto loans. * Jessa and her husband have a $ 200,000 mortgage. * She currently saves $ 0 on her retirement plan. (Sorry, but that’s not enough, buddy.) * She and her husband need help from Facet Wealth – a complete financial planning service with certified and dedicated financial planners. According to a Bank of America survey, a staggering 16% of millennials between the ages of 24 and 38 now have at least $ 100,000 saved for retirement. This is cause for celebration. But what about Jessa? What does she need to do to get out of debt and save enough for retirement? Why does the millennium generation struggle to save for retirement Why does the millennium generation like Jessa struggle to save for retirement? 1. Housing costs: Answer No. 1 (37%) for the millennium generation is housing costs, according to the Retirement Pulse Survey. 2. Supporting family members financially: Millennials often support family members with their income. This doesn’t even involve the amount you need to save to get your kids to college – remember, financial aid doesn’t cover everything. 3. Insufficient income: State of Our Money shares that more than half of the millennium generation (55%) does not have a retirement savings account, such as a 401 (k) or IRA. About 46% said that unemployment is to blame. 4. Student loan debt: In September 2017, the average graduate of the 2016 class owed more than $ 37,000 in student loan debt, according to Student Loan Hero. “Yes, yes and yes,” she said, when I showed her these numbers. “We reached three of these four categories. I just can’t put money in my retirement account right now. ” What my Generation Y colleague needs to do – and here’s what you can do too! Do you feel that the percentages are against you? Here’s what to do next. Tip 1: Analyze interest rates. As soon as I said the words “interest rate”, Jessa fell on the desk chair and pretended to fall asleep. I knew that Jessa and her husband refinanced the house last fall and I asked her about interest rates. She was paying only 3% of the house and student loans. I suggested asking Facet Wealth if they should invest in retirement more aggressively than paying off their loan debts. (That’s what I would vote for!) On the other hand, if you have high interest rates on your own student loans, I suggest that you ask Facet Wealth on how to repay debt if your loans have a higher rate than your investments earn before the taxes . Tip 2: Consolidate student loans – but there is a problem. Consider consolidating student loan payments only if you can reduce your payment without extending the loan term. In the case of Jessa, she could use the extra money to start increasing her savings for retirement. Tip 3: Start breaking that retirement plan. Jessa must save at least 10% of her income. It is the rule of thumb cited by most financial advisers and other money experts. If Jessa doesn’t want to struggle to keep her head above water after retirement, she needs to invest 10% of her income each year. And none of that crap “investing just enough to get the employer matched”. In most cases, this is not enough retirement savings for most people and will not scratch the surface to create a sturdy sock. Tip 4: to get really rich, invest at least 15%. If Jessa wants to become really wealthy as a passive investor, she will invest at least 15% of her income. She won’t make Warren Buffett rich, of course, but if she wants at least $ 1 million in net assets in addition to the value of her home, she’ll try to save 15%. This goes for anyone who invests to retire. Tip 5: Never, ever borrow from your retirement plan. You can borrow money from your retirement account, but it is not a good idea. Jessa’s retirement plan is off-limits, and so is yours. Suppose the money is blocked. Period. Because? * You lose compound growth in your earnings. * You pay the loan in cash after tax, which means that the interest you pay will be taxed again when you withdraw it in retirement (unless you apply for a loan from a Roth 401 (k). * If you leave the job, you will have to pay the loan, usually within 60 days after leaving, if you cannot, you will have to pay taxes on the balance and a 10% fine if you are under 55. You don’t want to mess with all of this. Tip 5: Take the time to analyze which options are best for you. After controlling for retirement savings, you may want to take a look at other potential opportunities. Perhaps Jessa and her husband want to invest in real estate or engage in several secondary activities. Whatever it is, she needs to make sure it’s worth her time and energy and can contribute to her long-term goals. Tip 6: do your own research. Jessa proudly graduated from a liberal arts college , which means that she learns her whole life. Another thing she will do to maximize her success: she will read everything she can. r hands. She will research funds and options within her 401 (k), read investment books, books on real estate, articles on debt destruction and more. It will absorb blog posts, listen to podcasts and develop its own investment philosophy. She will be your own advocate when it comes to your own needs, risk tolerance and more, and so can you. How much money for retirement should you aim to save? Jessa is 28 years old, but the millennium generation spans a wide range of ages – from 24 to 38. Check the ground rules for savings at each age. Savings target for 20 years Accumulate 25% of your total gross salary during the 20 years. It may be necessary to reduce this amount if you have accumulated a huge student loan debt. Savings target for your 30 years To have at least one year of salary saved up to 30 years. If Jessa earned $ 100,000, she should have saved $ 100,000. Economy target for ages 35 to 40 years old Those of you in the mid-30s of the millennial spectrum should have twice your annual salary saved. You must save four times your annual salary if you are 40 years old. Steps to get there If she really wants to get out of debt and save enough for retirement, Jessa must do these three things. Step 1: Get started. This article will not help – if she (or you) does nothing about it. You must act if you really want to save enough and get out of debt. It takes time and discipline and not even a lot of money per month (depending on your age). Step 2: Invest aggressively, automatically. Two facts: * If you start at 24, you can have $ 1 million at 69. All you need to do is save $ 35 a month – and get a 10% return on your investments. Save more and you will become a millionaire faster. * If you start with 40, you can save $ 1 million by saving $ 561 a month, assuming a 10% return. I informed Jessa that since she saved $ 0 to retire at this point, she can start saving at least $ 158.15 a month for 40 years with a 10% return and still be able to become a millionaire. $ 158.15 – that’s the cost of a new pair of shoes each month, I informed her. Get the wealth of facets on your side No one ever says, “Be your own doctor.” Why would you assume, then, that you should be your own financial advisor (unless you are an analyst or financial advisor)? You need Facet Wealth, which can help you achieve a more prosperous life by helping you work with a dedicated Professional CFP® at an affordable price. Jessa informed me that she signed up for our company’s retirement plan and also made a plan to get out of debt the next day. I bought her a cupcake and put it on her table. It was a cause for celebration. See more of Benzinga * Click here to see Benzinga’s options * 8 unmissable tips to check the history of your employee working at home * Preview of 2021 encryption: what’s next (C) 2021 Benzinga. with. Benzinga does not provide investment advice. All rights reserved.