Millennials Can Create a Lifelong Wealth Plan
For a highly educated generation, Millennials show a surprising ineptitude in certain areas of money management. And a generation that lacks secure pensions will certainly need to prepare for their twilight years.
The good news is that Millennials have shown the greatest increase in their savings rate compared with any other generation, according to new data from Fidelity. The typical 20-something is now stashing away 7.5% of income vs. just 5.8% in 2013.
Generation X and Boomers are still saving larger percentages of salary but have not stepped up their contributions by nearly as much. There is an added complication for Millennials – student loans and other sources of long-term debt. Without the financial knowledge to dig out of their debt hole, this could prove to be a permanent setback.
According to the Global Financial Literacy Excellence Center at the George Washington University, young adults with a college degree are much more likely than previous generations to start their economic life in debt.
Young people saving for retirement do have one big advantage — time. With traditional pensions disappearing and Social Security in trouble, saving now is their safest bet, and young people have a head start in this category. Compound growth over an extra 10 years may double your nest egg by age 70, which is why some savvy Millennials are outpacing previous generations in building wealth.
Always strive to save at least 10% of pre-tax pay—even more, if you can—and contribute enough to your 401(k) plan to get the full company match. Then add to your contributions with every pay raise. To stay on track and keep things simple, sign up for (or do not opt out of) the auto-enrollment and auto-escalation of contributions featured in many plans.
By starting to plan for your future now, you will have a head start on a secure future.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.