We’ve talked recently about the struggles facing Generations X & Y when it comes to saving for their retirement. Chris McMahon of Financial Planning gives us “5 Things Gens X and Y Can do for a More Secure Retirement. LIMRA found that most of the Americans falling in the Gen X and Y categories don’t have a good understanding of the financial products and services they’ll need to use in order to fund a successful retirement. There are 116 million of them in America, but their needs vary because the generations span the ages of 20-47. Even with different current needs, their final goals are the same and these tips apply to most Gen X and Y Americans. By starting your retirement savings a couple years sooner, it can make a drastic impact on your retirement preparedness. But of those surveyed, not even half of Generation X made retirement saving a top priority and less than 1/3 of Generation Y did.
LIMRA offers five ways that you can help ensure your retirement will be secure, the first of which is improving your overall financial knowledge. Educate yourself on the financial services and products available so that you can make better financial decisions. Well over half of both generations indicated that they have little to no financial knowledge when it comes to saving for retirement.
One of the most important suggestions for Gen X and Yers is to work with a financial professional. Working with an expert improves all of your statistics and helps ensure you make decisions that will positively impact your financial future. While this age group does not like taking on market risk, now is a good time for them to have a riskier portfolio to help grow their retirement savings over the decades. By working with a pro, you are more likely to contribute to some kind of retirement savings plan, save a higher percentage of your earnings, and have more confidence in meeting your retirement goals.
Even though 75% of people in these generations have access to a defined contribution plan at work with employer matches, more than half of Gen X and Gen Yers don’t participate. Take advantage of automatic workplace savings plans and especially those where your employer will match your funds. That is free money! If you don’t have a 401k or other workplace plan available, take advantage of the tax-deferred savings of a product like New York Life’s deferred income annuity or an IRA.
Make sure to continually increase your savings. Some plans have automatic increases and re-balancing of assets. If yours does not, be diligent about increasing your contributions 1-2% every year and looking over your portfolio to see if you need to make any changes to how your money is allocated.
Finally, leave your retirement savings where it is. Don’t withdraw the money to use for a new house, car, or health care expenses. You should have other money set aside to use for those things and make sure to leave your retirement money untouched until retirement. Every dollar taken out of your retirement savings pushes you much farther away from reaching your financial goals. Following this advice from LIMRA will really help Generation X and Y Americans secure their financial future in retirement in an era without pensions and maybe without Social Security.
Written by Rachel Summit