Can You Save For Retirement Like These Savvy American Millennials?
The sense of responsibility has grown considerably among the younger generation. People in their 20s and 30s have started to set an example on how to save for retirement. The American youth is literally taking full advantage of the retirement savings options that are offered either by the government or their respective employers. Millennials are savvy at saving for retirement, and according to a research study conducted recently, around 20% of the youngsters are setting aside around 15% of their earnings into their retirement funds. Can you follow the footsteps of the American millennials? Let’s find some inspiration first.
How Much Are The New Generation Setting Aside?
As per an average estimation, a typical American youth rakes in almost $73,000 every year, and in comparison to their predecessors, they are setting aside almost twice in their respective retirement accounts. The 401(k) balance for these youngsters is $22,100 on an average. People who are saving more than 15% boasts of $44,000 as their average balance. Numbers reveal that the young and working Americans are attracted to the 401(k) plans like never before, owing to some major innovations in the field of retirement savings. The auto-enrollment feature adjusts the bonds and equities of an investor so that they can gather significant benefits as retirement inches closer.
How Many Of Them Are Investing In Stocks?
Around 62% of the youth born between 1981 and 1998 have invested fully in some sort of target date funds. These people have capitalized well on investment options and that has been truly beneficial for them. They are going to reap huge dividends in the future and that’s a given. However, the super-savers are more in favor of picking their investments. According to Fidelity estimation, these youngsters are inclined towards investing in stocks and are said to have invested nearly 85% of their retirement savings in the stock market. The savers from the same age group that has availed target date funds have invested almost 89% in stocks. A further study says that nearly 4% have sensed trouble and have taken out their entire savings from the stocks. Probably, facing an apocalypse was not something they would have bargained for.
What Goals Should The Younger Generation Set For Themselves?
Sticking to a solid retirement plan is highly recommended. That’s bound to help them in the long run. Many youngsters nowadays are tempted to use their money to attain some short-term goals. But, that’s a sort of temporary relief and nothing more. Students have to take into account a lot of other important aspects such as paying for student loans and new bills and maintaining a high cost of living at the same time. However, they have to prioritize their retirement savings as well, and that’s what these young’uns are up to. Their savings will ultimately come to their aid once they call it a day. The more retirement savings you have, the better lifestyle you would be able to maintain after you retire.
How Much Should You Save?
The rule of thumb says that you must aim to put aside nearly 15% of the pre-tax income every single year. This 15% might include an amount contributed by your employer. This is recommended especially in scenarios when you start saving from the age of 25 till the time you quit your job. Does 15% seem a lot? Well, if you possess a workplace retirement account or a 401 (k), things are bound to get easier for you. Amalgamating that with a few other important steps, you would save a substantial amount of money to lead a comfortable life in retirement. The target saving rate may vary from person to person. It generally depends on a number of factors such as your time of retirement, your lifestyle in retirement, when you have started setting aside a good amount, and how much you have been able to save till now. Your saving per year depends on four retirement metrics – the savings rate per year, the savings factor, a sustainable withdrawal rate, and your income replacement rate.
Saving money for either a rainy day or your eventual retirement is quite a difficult job these days as there are a lot of distractions around you. But, if you are able to steer yourself clear from them, be rest assured that your future is absolutely secure. Sketch out your financial goals and abide by that.
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