Can Millennials Hope to Ever Retire?

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Millennials were born between 1980 and 1996, meaning in 2022, millennials are 26 to 42 years old. If we imagine retiring at age 65, that gives us 23 to 39 years to save for retirement.

Investing and saving for retirement is one of those things where a little goes a long way. What I mean is by putting a little bit of money consistently into investments, you can be big results.

Let’s say you invest $100 per paycheck or $2,400 per year for 40 years, and you earn an annual interest rate of 7%. Over the 40 years, you’d have contributed $96,000, but you’d end up with around $480,000.

By investing your money, rather than just saving it, you’d increase your account 5 times over. It doesn’t require any extra work or time, or money. You just have to take the step to put your money in a position where it can be working for you and not sitting idle. Hiring a financial advisor for millennials is a great way to get started if you’re not comfortable investing on your own.

Other Ways to Fund Your Retirement

As you’re going through life, you’re going to have opportunities for things that will help you out when it comes to saving for retirement like a group plan or a pension plan.

Group plans like a 401(k) are a great way to take advantage of employer contributions for a retirement plan. It’s essentially free money. If your employer offers some sort of group plan look into it and try to take advantage of it. Again, remember it’s important to start now if you haven’t already. Just because you’ve had a plan available to you, but haven’t taken advantage of it, doesn’t mean you can’t now. It’s still free money so take it.

Pay Off Your Debt First

For most people, including millennials, their biggest expense throughout their life is their mortgage or rent. Imagine your current salary, bills, and the lifestyle you fund. But imagine you didn’t have to pay rent or pay your mortgage. That would be such a relief! You’d be able to save so much more money, and the money you make would seem like a ton.

It’s not always about how much money we make but how we spend our money. Putting yourself in a position to spend less means the money you bring in can go further. When you retire, if you could have no credit card debt, no outstanding loans, and no mortgage or rent, the amount you’d need for retirement decreases significantly.

Throughout a lifetime, if you rent or buy a house, I’ve read a lot of perspectives that suggest you could come out about even. For me, the big advantage is what happens after your mortgage is paid off.

Let’s look at two individuals that are retiring. The first is renting, and the second has paid off their mortgage already. Rent is $1,000 per month and doesn’t include utilities. The homeowner will pay property taxes and home insurance ($150 per month), but otherwise, their remaining bills will be similar. If we run this scenario out for 30 years, age 65 to 95, the renter will have paid $360,000 in rent. The homeowner about $54,000 in property taxes and home insurance. Now, these numbers are cheap, even for today. By the time you retire, inflation will have pushed prices upwards and rent never gets cheaper.

By eliminating debts prior to retirement, you’ll have fewer expenses in retirement. Homeownership can seem like a big hurdle, but it’s absolutely not impossible.

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I know for most people reading this, retirement is a long way away. If you take little steps now, you will see big results down the road. Remember, a marathon starts with a single step.