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The Millennials Recipe for Ruining Retirement


When it comes to saving for retirement, most people are not coming close to saving as much as they should. According to a recent survey from Fidelity, the millennials, who are the furthest away from retirement, are falling significantly short in saving.

Fifty one percent of millennials polled said they are saving less than 6% of their salary, despite the conventional wisdom that says you should save at least 10% (source). Worse still, according to Hartford Funds research, after growing up during the financial crisis, millennials are reluctant to invest in the stock market and are generally investing as conservatively as 75 year-olds.

Mistakes made in youth can significantly impact their future. Here's how millennials can ruin their retirement.

Start saving early

Half of Millennials haven't figured out how much money they will need to retire and nearly one quarter feel they are too young to worry about saving retirement, according to Tracy Shaw, assistant vice president of business market development at MassMutual. While it may seem too early to start saving, or difficult to find room in a budget, saving early even if that means contributing a small amount, will set the foundation and prevent having to make lifestyle changes later in life,says Shaw.

The moral of this story, save early and often. The longer you delay saving for retirement the smaller your nest egg will be,says Rakesh Gupta, a professor at Adelphi University.

Not developing a plan

Though retirement seems light years away, the sooner you begin visualizing what would be ideal, the better. But dreams are just dreams. Plan how you will get there. Research what financial instruments would support your plan. Stock, bonds, annuities, art, real estate and business are among the many investments that you can make, says Debra Speyer, an estate planning attorney.

It's not enough to make a plan. Exercise the discipline to follow the plan, she adds. A plan without action is pointless.

Forget the mac mansion and fancy car

In pursuit of the American Dream, far too many people stretch themselves financially to get into a house and the results are often disastrous, says Scott Halliwell, a certified financial planner with USAA.

Mortgage payments that are too big, combined with savings account balances that are too low, often lead to higher levels of consumer debt and less money being put away for retirement.

"Get a solid emergency fund in place, a solid budget in place, start saving 10-15% of your pay for retirement, then figure out how to get in a home that you can afford. This way, becoming 'house poor' won't interfere with becoming 'retirement ready',says Halliwell.

It's a mistake too, to go for that dream car early in life, when you're already saddled with student loan and credit card debt, not to mention that you haven't landed that "big job" you thought, given the economy. In addition to the car payment itself taking away from your ability to save fore retirement, jumping on the consumerism bandwagon is often a gateway to making other poor financial decisions, says Halliwell.

Deal swiftly with student loans

Federal student loan debt crossed the milestone of $1 trillion last year. Student loans are a necessary evil for many people, but having to make huge student loan payments for a decade or more after graduation takes away money that could be saved for retirement. By the time the loans are paid off and the money is freed up for other purposes like retirement savings, the typical student loan-burdened Millennial is likely to be behind where they should be, says Halliwell.

"Be thoughtful about how much student loan debt you incur and understand that finding yourself at the bottom of a giant pit of debt you've got to climb out of is a terrible way to start adult life, says Halliwell. Aim to be able to start saving for retirement as soon as you get that first paycheck.

Put the plastic away

It's not just student loan debt that is weighing down Millennials. Fifty one percent of Millennials have credit card debt, with the average amount of debt being near $4,500, according to Shaw. "Even though it may seem tempting to pay the minimum amount on a credit card or other high interest account, doing so will only prolong the debt, says Shaw.

Consider the interest rate and payoff time when handing over a credit card for a purchase or making a payment on an account.

Expect the unexpected

Just like you need to save money for emergencies, realize that one day you might be disabled such that you can't work. If you're not prepared and you suffer a long period of disability that could impact your ability to save for retirement. Disability insurance plays a key role in protecting your income should you become too sick or injured to work.

However, according to MassMutual, only 28% of Millennials have disability insurance. Disability insurance covers the basics like you mortgage or rent, credit card payments, for example. You may be young and invincible but tomorrow comes and who knows what it may bring.

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Kaight   |     |   Comment #1
I think I disagree with the thrust of this piece.  But I'm not certain I disagree.  People should be expected to act in their own best self interest.  The article seems to be telling us that it's in everyone's best self interest to save at least 10% of income toward retirement.  I certainly agree that once was the case.  But is it the case today?

We live now in the era of the bailout.  Overspending, even incompetence, is all too often rewarded by eventual face-saving, bacon-saving, community salvation.  Everyone else is forced to chip in to save the incompetent and unproductive.  Thus, why save for retirement properly?  Why not just spend your money as it becomes available and rely on responsible people to come to your aid at the end?

The reason I'm uncertain about this is, at some point, the insanity of such bailouts might once again become recognized.  If that happens there could, down the line, be real suffering for those who do not save for retirement.  Nobody would want to experience that outcome.  And I cannot predict what our society will be like thirty or forty years into the future.

So perhaps saving for retirement is best after all.  But with the contrary examples visible to younger people today, I can scarcely blame or criticize those who believe otherwise.  
Anonymous   |     |   Comment #4
So, what you are implying is, stay poor all of your life and enjoy few spurts of happiness now and then when the money is available.
Such life style leads to dangerous mental disconnect with reality and never allows you to grow and be responsible person.
In such society, everyone will suffer and is not sustainable on long run.
If you are supporting socialism, you do not belong in this country.
Anonymous   |     |   Comment #7
??  I don't think Kaight was writing in support of socialism.  If anything, I think she was dismayed over the moral hazard it creates.


Your closing statement is clearly in error.  Where have you been hiding for the last five years to be so unaware of what is going on here.  We are rushing headlong into socialism.  This simply could not be more self-evident.
Anonymous   |     |   Comment #9
To #7and #4, wrong again, the democrats and Obama want socialism not the rest of the country. Obama experiment of being a dictator and socialist and running this country from his office and by-passing the congress will back fire and create sub class Americans who will be made poor and disconnected from the society for the rest of their lives. Being dependant on the government is no way to live, unless you are dumb and un-educated and have no desire to advance your goals as a real human. What Obama is creating is a class destruction of a nation that once was proud of its achievements. Since, you support such ideology, I will invest in tax free bonds and find a creative way to shelter my rich and enjoyable life style, full of travel trips and lavish life that I have accomplished by being independent.
Being dependent on the government for a full life cycle, makes you no better than a caged animal.
Anonymous   |     |   Comment #12
This article regards retirement (which is related to banking products and interest rates), not politics.  Unfortunately the comments are again infiltrated with irrelevant anti-Obama/Democratic/government posts.
Dan   |     |   Comment #15
#12, the current government created the anger, anguish and openly are supporting socialism and free immigration and you want to flash that down the drain, it says a lot about your view of the present downfall of America. Are you going to let a lying Obama become your favorite president or are you going to expose all his wrong doings, which are in hundreds by now.
Anonymous   |     |   Comment #17
Wrong again?  I don't think so.  Wake up!!  More Americans voted for President Obama than for McCain.  More Americans voted for President Obama than for Governor Romney.  Just because you happen not to like the President does not mean much.  You were outvoted!!

And, as I read her post, that was Kaight's point.  So long as things remain this way, why bother to save for retirement . . . or for anything else!  There is no need, and you are missing out on all the things you can buy with that money right now.  In future, I think she is saying, Obama (or someone else of his ilk) will tax productive people to take care of you and see to you needs.

Kaight does point out that if this paradigm changes you will be in trouble later if you do not save for retirement now.  I agree with her it's a risk.  But so far it appears to be a risk worth taking, and a lot will have to change before that ceases to be the reality. 
Anonymous   |     |   Comment #18
#17, we were not out voted, we were scammed by illegals allowed to vote, double and triple votes, dead people voting, illegals voting, stuff the ballot box with pre-punched Obama votes and many other illegal voting activities.
Anonymous   |     |   Comment #11
#1, become real American or go down the government trap hell hole and be poor, there is no third option. You are thinking both ways as way to live, I'm sorry to disappoint you, but you suffer from common jealousy syndrome and you can not have it both ways.
Anonymous   |     |   Comment #14
what is the point of this article(?)?  is it to engender sympathy for the millenials (and future generations) who will have to support the country, but will be loaded with debt and possibly not earn enough (for retirement or even just a good living in general)?  or is it to help the millenials (and young savers) save more for the future so that retirement doesn't become an actual dream?  Yes, this article(?) is on a site related to banking products,and savings in general (not politics) but the article only has figures on millenials (percentages and such)  and vague solutions/suggestions for the millenials..politics and economy often are lumped together...and both affect the concept of retirement.  fwiw, I belive the article should have suggestions with substance instead of the vague "cut debt and save" message that has been diluted in the piece.  if possible, the piece should've had strong suggestions on what to do (that and to reorganize the sub paragraphs a little by switching the "plan" and "savings" order (plan should come first...then reduce debt, then savings, etc) along with an option on what will help.  (for reduce debt...perhaps suggest refinance(?) the student loan to get lower rate...credit card debt?  then do a balance transfer and pay it off ASAP...the usual stuff....for savings in general, provide vehicles like installment savings accounts/no minimum high yield savings....)  it's just that overall this piece is not that meaty...as a result, less commentary and less reaction.
Anonymous   |     |   Comment #19
Most of these articles are designed to drive people to the nearest financial adviser. No one cares about anyone not being able to retire, unless it's you looking in the mirror. Not once in my life has anyone showed the slightest interest in my retirement plans. The so-called "retirement" crisis has a simple solution. Siblings live with siblings, aging parents live with children and spendthrifts move into one or two bedroom apartments. Absolutely no one is  guaranteed a retirement based on 80% of their pre-retirement income. Spend some time with people in the bottom 20% of our society and you'll see just how arrogant many of these articles are.
Gaelicwench   |     |   Comment #2
Interesting that this is about the Millennials and the importance of starting to save NOW.

I am in my 50s, and currently am going to school to pursue a different career. In class with me are a handful of Millennials, but definitely not with the same ambition as I have. It's interesting to hear the different discussions going on; the students comprise largely of girls. Retirement is something they never discuss. Cars, clothing, the kind of house they'd like, shopping, shopping, shopping. It really is interesting to hear what kids that age are talking about.

I will concede that when I was their age back in the late '70s, retirement to me was a totally foreign concept. I spent and never saved. Granted, there was nowhere near the kinds of tools on hand for me to benefit from; school certainly didn't offer them like they do today. But, as the old cliche always says, hindsight is indeed 20/20.
Anonymous   |     |   Comment #3
Just watched Matthew Segal on C-Span who is a co-founder of Our Time (millennials) He is amazing and the statistics he had about the millennials and information about those in that age group was outstanding. What you see in the classroom I have to believe are the not leaders of tomorrow. The millennials I see are involved with their studies, the city, county governments, helping at the food banks, painting houses, cleaning up yards for the older generation. Offering baby sitting services for an occasional Sat night taking children to a movie etc so that a couple can just have an evening to themselves at home for a couple of hours. We have some great groups in my town that will be the leaders of the future. 
tenpen11123   |     |   Comment #5
Perhaps the reason so few people are commenting on this post is due to the fact that we have a very tiny percentage of millennials on this site.  Don't know if the site has done much in the way of elaborate demographic studies.  Perhaps since it seems to be doing so well!
Anonymous   |     |   Comment #6
Alot of girls thinking "SugarDaddy"
pinkterror   |     |   Comment #8
i think one of the reasnos very few people are commenting is due to the fact people have to be logged in to comment.  (there are other topics that might have more replies/comments...because they allow anonymous people to reply....)  this topic is...sorta a reiteration of what people have read before (i had to double check if this was a michelle singletary thing or not...because while the points are there, it's just not that...provoking or substantial....because the message(?) delivered is not being read by the targeted(?) audience  it's being read by people might be torn between commenting or just leaving it alone)
Anonymous   |     |   Comment #10
Retirement often means downsizing. Retirement articles rarely mention this reality.
Anonymous   |     |   Comment #13
#2, I call them gullible brats (today's kids). I have a friend who went on food stamps and his life changed for worst. He did not know that all government programs taken by anyone are reported to the credit bureaus (all of them).
Now, all his credit cards have been canceled, he can not buy anything on credit, job hunting is very difficult now and most everyone finds excuses not to employ him, even McDonald is not hiring him for minimum wage.
He wishes he never took the **** food stamps ever. Let it be a lesson for anyone thinking to use the government for any hand outs (as cash cow), unless you want to be sub citizen forever and pay much more on long run.
Anonymous   |     |   Comment #16
Live within your means and you will not need a credit card.  Food stamps, welfare checks, etc. are the new American way.  Socialism!  No such people as "sub citizens".  With a few exceptions, you are either a citizen, a foreigner with a visa, or an illegal immigrant.
Anonymous   |     |   Comment #20
#16, sub citizen is implied to reference to the lazies, users, manipulators, liars, cheaters.....and so on. They will never contribute back, got that?
Anonymous   |     |   Comment #21
How exactly are food stamps, welfare checks, etc. the "new" American way?  This is not some recent thing.  It has been going on for many years.
Anonymous   |     |   Comment #23
Yes, those programs have been in place for a good many years.  But when they first started, only the truly needy took advantage of them and still others were too proud to apply for government handouts.  Today, there are far too many able bodied lazy slackers only to willing accept our tax payer funded government handouts. 

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