Millennials face the least certainty about the future of Social Security by the time they reach retirement, making retirement planning essential for this group. Money put away earlier in life will grow much more than money put away later, thanks to compounding interest. Despite these compelling reasons to save for retirement early, many people in their 20s and 30s are not on track to save enough for retirement.
The single biggest problem Millennials face when it comes to saving for retirement is not saving — or not saving enough. Only six in 10 workers who are ages 25 to 34 contribute to their 401(k), compared to 74 percent of workers ages 55 to 64, according to a recent Vanguard report.
Those who do put money aside often do not save enough. Workers ages 25 to 34 put an average of 5.5 percent of their income into their 401(k), compared to 8.7 percent for those ages 55 to 64 — and the optimal rate to save may be higher than either of those numbers. As it stands, many Millennials do not save enough to receive their employer match, which means they miss out on “free” money.
These issues are particularly troubling because saving for retirement early has the biggest positive impact on retirement saving. It is much more difficult to make up for lost time in one’s 40s and 50s than it is to save an optimal amount during one’s 20s and 30s.
The good news is that, while Millennials as a whole are not on track to be prepared for retirement, individual young people still have time to make the necessary adjustments to get on track — and those changes will reap greater benefits than for an older person putting the same amount of money away.
The elder law attorneys at Hook Law Center assist Virginia families with will preparation, trust & estate administration, guardianships and conservatorships, long-term care planning, special needs planning, veterans benefits, and more. To learn more, visit http://www.hooklawcenter.com/ or call 757-399-7506.