Is your retirement number close to $1.8 Million?
When we are young and start earning our first paycheck it is so hard to think that a % needs to be put away for when we retire. I mean when you look down and see that X dollar amount was taken out for Social Security and X dollar amount was taken out for Medicare and all of the other deductions that go along with each paycheck the thought of saving usually goes to the backburner. The idea of saving 3% or 10% or 20% of a paycheck so that you can retire in 35 or 40 years feels like it is so far away especially when there is a pair of Jimmy Choos that are really calling your name. When it comes the conversation of savings account, retirement accounts or 401K’s most of us go into frozen mode. We have been taught through generational conditioning, TV shows and even our friends to either put off the idea of saving or even worse we fear the balance in our savings account. There is always the thought of I will put money away when I get a raise or somehow a large number will magically appear by the time I retire. The thought that a large amount will magically appear is as possible as finding a unicorn.
This leads to the next question of how much will a millennial really need to maintain their lifestyle when they retire. According to USAToday, millennials born in the early 1980s will need about $1.8 million in savings to maintain their standard of living in retirement. Meanwhile, younger millennials born in the late 1990s will need a minimum of $2.5 million. These numbers look and feel like it will become impossible to fill that nest egg. Here are 3 tips to start contributing to your savings so you don’t have to start looking for unicorns:
- Record your Expenses – In order to know how much you can save a month, you will need to know how much you are earning and spending a month. Keep track of every transaction whether it be $5 you spend on your venti caramel macchiato to your bigger expenses like your rent check. At the end of the month tally up the total.
- Set a Savings Goal – If you have a goal in mind it will make it fun and attainable. As humans, we need to have an incentive or a goal to keep us focused on the priority. To start set a monthly goal, an annual goal and then a 3 year goal. Looking at the final number will help with the bigger picture and keep you on track when you come across the must have a new handbag.
- Direct Deposit into a Savings Account – This is the easiest way to contribute to your savings and you will thank yourself at the end of the year when you see the dollar amounts increase. Pick either a percent or a dollar amount that you feel comfortable with. Something that you know you can live without and it will not leave you eating spaghetti o’s the last week of the month. $100 a month will be $1200 by the end of the year. Looking at your balance on month 1 and seeing $100 and at the end of the year it will be $1200 and in 3 years it will be $3,600 is a really good feeling. By having the direct deposit you will not have to remember to transfer the amount or it will not accidentally be spent (on the Jimmy Choos or the must have handbag).