With student loan payments, credit card bills, rent, and transportation expenses, saving for retirement can be difficult for millennials. Most millennials are just starting their careers, so their incomes are lower than average. Although they’re saving 7.8 percent of their income for retirement (compared to 3.8 percent in 2013), it’s not enough. Many financial planners recommend saving at least 15 percent of your income for retirement. So, what can millennials do to save more for retirement? Here are four helpful tips.
Cut Down Expenses
Cutting expenses is the first step in saving for retirement. Housing and transportation are the two biggest expenses for most people, so those are good areas to start with. Whenever it’s possible, millennials should consider cheaper alternatives. Instead of signing a lease, live at home with your parents for a couple more years. And, hold off on buying that new car and opt for public transportation. By cutting down these expenses, millennials can free up more of their income towards retirement. This also allows them to make these larger purchases when they have more financial stability.
Make a Budget
It’s important for millennials to create a budget so that they know where their money is going. A budget can help you monitor your monthly income and expenses. Millennials should organize their monthly budget into three categories: current expenses (e.g. food, rent, etc.), committed expenses (e.g. student loans), and savings (e.g. retirement). It’s also helpful to prioritize your expenses between fixed and variable. This allows you to commit to your budget more easily. And, with budgeting apps such as Mint, creating a budget is convenient and hassle-free.
Get a 401(k) Match
Millennials should take full advantage of their employer’s 401(k) matching plan (if offered). With a 401(k), employees contribute part of their salary into a retirement fund and the employer matches a certain percentage of that contribution. While employer match policies vary, most employers pay back 50 cents for every $1 you put into your 401(k), up to 6 percent. It’s free money, so make sure to contribute to your employer’s 401(k) plan. Even without a matching plan, you can still benefit from tax-deferred earnings by contributing to a 401(k).
Consider Gold IRAs
Gold IRAs are also a good option because they can protect retirement funds in times of economic turmoil. When the economy is doing poorly, the value of stocks, bonds, and paper assets decline as inflation increases. However, gold and silver tend to hold their value above inflation. With a gold IRA, you can reduce the risk of losing your retirement savings due to economic factors outside of your control.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.