It will be decades before people who are in their 20s and 30s are able to retire. However, now is the time to establish good financial habits so that you will be able to retire when the time is right. Alicia Munnell is the director of retirement research for Boston College.
Alicia stated that Millennials are behind their parents. They have less wealth and income than their parents had at the same ages. Millennials have to save more for retirement because they have more debt. They are also expected to live longer than their parents. There are several steps that you can take to save more for retirement.
Save 10 Percent Per Year
You will need to save at least 10 percent of your income for retirement. If your employer offers you a 401K, then you may not have to save as much. For example, your employer contributes three percent of your income to retirement. You only have to save 7 percent. However, the more you save, the better off you will be.
Have an Emergency Fund
Many people are tempted to dip into their retirement savings when they have a financial problem. That is why it is important to have an emergency fund. You should put at least 5 percent of your income in your emergency fund.
Student Loans and Retirement Savings
Student loans make it hard for people to save for retirement. You can pay off your student loans faster by finding ways to make extra money. You can freelance in your spare time. You may also want to take in a roommate.
Additionally, you can refinance your student loans. If you refinance your student loans, then you will be able to get a lower interest rate. You may also be able to suspend your payments if you lose your job.