Retirement Planning

Retirement Directions for Millennials

Just because you're young does not mean it's too early to plan for retirement. Here's some basic information to get you started. You can't afford to ignore it.

Jumpstart Your Retirement Plan.

There's a lot of hand-wringing in the finance industry about how millennials are retirement planning, or more specifically, how they're not.1 Millennials have different priorities than those of generations past. They're more worried about repaying hefty student loan debts2, and they're waiting later to buy homes and have children. Many entered the workforce at a particularly unstable time in our nation's economy, and others didn't find their career footing right out of college, which means they started their careers much later than anticipated. Now, as the first few waves of millennials hit 30, it's increasingly important that this generation turns their focus towards creating a solid retirement plan. If you're not sure where to begin, you may want to consider the following suggestions.

Fund an IRA.

If you haven't made any sound financial plans for retirement, consider opening an IRA (Individual Retirement Account). IRAs allow you to funnel your money into a wide variety of investment opportunities, such as low-risk stock portfolios, even lower risk government bonds, etc., and they have big tax advantages. You can choose between a traditional IRA or a Roth IRA, which allow you to deposit your income pre-tax or post-tax, respectively. (Pre-tax contributions made into a traditional IRA will be taxed when you withdraw them later in life. Post-tax contributions made into a Roth IRA can be withdrawn later free of taxes.) So if you put aside $5,500 in your IRA every year (the max allowed contribution for those under 50), you'll have over $220,000 in contributions in that account in 40 years' time, and that's before any interest is added.

Gradually increase your contribution to your 401(k) or other retirement savings accounts.

If you have an employer-sponsored retirement plan such as a 401(k), you should gradually increase your direct contributions over time. It's usually suggested that those new to 401(k)s start by contributing around 10 percent of their salary to such plans, but as you age, you'll want to bump that number up to as much as 25-30 percent as you near retirement. Want to retire sooner? Then bump that percentage up faster. If your employer matches your contributions to your IRA up to a certain percentage, make sure you're taking full advantage of such opportunities. That's free money for your retirement.

Get educated about Social Security and other retirement benefits.

Know what's owed to you. It's important that millennials understand how Social Security works, as well as other retirement benefits such as Medicare and even Disability benefits-should you need them later in life. It's even more important to know how far your post-retirement Social Security payments will actually go after a lifetime's worth of inflation and cost of living adjustments. (Depending on social security benefits alone to ensure your ability to retire comfortably could be risky.) You can find a wealth of info about your future benefits at the website for the Social Security Administration.

Retirement may feel like it is eons away, but it's important to stay connected to your retirement goals. You can use several of these free online budgeting tools to keep tabs on your retirement portfolio. If you need help understanding the basics of 401Ks or the difference between Traditional IRAs and Roth IRAs, we have helpful information in the Protective Learning Center.


1. https://www.bnymellon.com/us/en/our-thinking/business-insights/new-rules-for-engagement.jsp
2. http://www.npr.org/2014/04/10/301242410/many-millennials-are-drowning-in-student-loan-debt

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Retirement Directions

Retirement directions for millennials. That can be a difficult subject to approach in the fact that millennials have different priorities from those of generations past. But retirement directions for this age group can be honed to begin saving for an even brighter future than they may have expected. For more information, visit our learning center.

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