5 things every millennial should know about saving for retirement

5 things every millennial should know about saving for retirement

Retirement may seem so far away that you may not want to think about it. But for millennials, it shouldn’t be an afterthought because they have the best asset to make money on their side – time.

Millennials, or those born between 1981 and 1996, aren’t as far into their retirement years as you might think. The oldest millennial generation is now over 40 years old. With their full retirement age of 67 years old, they may not be on the right track yet when it comes to saving for retirement, diversifying their investment portfolio, and taking advantage of every advantage now while they still can.

Here’s what millennials need to know about retirement planning.

1. Save now (even if you don’t think you should)

For something that seems so far away, it’s easy to put off retirement savings and planning. But the more you save now, the less stressed your future self is likely to be.

You can do this by:

  1. Irish Republican Army. If you have nothing else, open an IRA with a robo advisor and make automatic payments to your account every month. Even $10 or $20 – which seems small – can add up over time. You can use a traditional or a Roth IRA – the biggest difference is how you are taxed. If you think you’ll retire in a higher tax bracket, go to a Roth IRA, which takes after-tax contributions and that’s more money in your pocket when you finally start taking deductions. Otherwise, go with a traditional IRA, but keep in mind that your withdrawals will be taxed when it’s time to withdraw the funds.
  2. Saving account. While dedicated retirement accounts are one of the best ways to increase your money, they are not the only way. You can also make additional contributions to a high yield savings account. The best savings accounts now offer interest rates above 1 percent, but that fluctuates with market conditions.
  3. Additional income. Get a bonus? Add it to your savings. Do you finish paying off a debt, such as paying off a car or student loans? Add these payments to your investment account. Did you catch a side hustle? Use it to pay off debts sooner and hide some of it in your retirement accounts. Large contributions are great but not always worthwhile, especially when you have other commitments at the moment. Use what you have to make small, smart contributions.

Here’s how much you should have saved for each age.

2. Diversify everything you can

There is no one way to save for retirement. You can have an employment sponsored 401(k) in addition to an IRA. You can have both a taxable investment account and a high yield savings account. The more accounts you have, the more protection you give yourself in the future.

That’s because spreading your money across multiple accounts and securities is one of the best ways to protect your investments. Avoid putting all of your money in one stock or asset. Instead, look for low-cost index funds, exchange-traded funds, and other investments that spread your money across multiple types of assets such as stocks, bonds, and real estate.

3. Take advantage of employer benefits

If you’re lucky enough to have an employer matching program with a 401(k) program sponsored by your business, you can save more for retirement now.

Employer matches vary greatly from company to company, but it is a good idea to screen potential employers to see what they contribute to these plans. Two of the most common types of matching are dollar-for-dollar matching and partial matches. Partial matches are when the employer matches contributions to a certain amount. Companies might see 50 percent of contributions match up to 6 percent of salary, for example. This is what it looks like.

Let’s say you earn $80,000 a year. If you contribute 6 percent of your salary, or $4,800, your employer will provide $2,400 annually in addition to your contributions. For 2022, all workers can contribute up to $20,500, while those 50 and older can contribute an additional $6,500. Any contribution from the employer comes on top of these maximum contributions, which amounts to $61,000 per year between the two contributions. This is a huge chunk that you can put into retirement each year with the help of your employer.

You can also take advantage of other employer benefits, for example if they have a student loan matching program where the employer matches student loan payments each month, up to a certain dollar limit or percentage. This can help you pay off your debts sooner and allocate more of your money to retirement savings.

4. Set regular goals

If you’re in the 40’s (or nearly 40) club and haven’t given much thought to retirement, you have some catching up to do. Give yourself regular, attainable goals. For example, you might start by making small, regular contributions to your retirement account. Then you can increase these contributions within a few months.

You may also find other ways to increase your savings. Let’s say you have a side hustle to help pay off outstanding debt. Once the debt is paid off, you can use this income to supplement your savings. This may add more money to your IRA or savings account. It can also cover regular home costs that your salary would normally cover and you can then increase your 401(k) contributions as much as you can.

5. Don’t be afraid to adapt

Your goals don’t have to look exactly like this, but setting and reviewing your retirement goals is important to make sure you’re on the right track to retire comfortably. Even though you’re not a college freshman like some other people, you have more time than you think to arrange your retirement plan.

Think about how much money you need for retirement that will last throughout your retirement. You can use a retirement calculator to help you find the right number. Use your resources now to help you figure out how to reach this goal. For example, can you increase your contributions now with your current employer or search for a new job that has a great match with your employer? Can you pay for your home before retirement or are you planning to downsize to save on expenses?

Your life at the age of 70 won’t look the same at the age of 40, so it’s okay if plans change. Give yourself a little grace and remember that it’s not a bad thing if it doesn’t go according to plan. Have a backup (or two). Your retiree will thank you.


While retirement may seem a long way off, time is your biggest ally in achieving your goals. It is important to start today, even if it is small. You will give yourself time to get used to the habit of saving and investing, so the probability of achieving your goals is much greater.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the performance of past investment products does not guarantee future price increases.

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