South Florida Hospital News
Saturday November 17, 2018
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November 2018 - Volume 15 - Issue 5

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Millennials and Retirement: the To-Do List

Retirement saving is not on most millennials’ list of top priorities. That may be why many experts expect that millennials will not be able to retire until well into their 70s.

In fact, according to Gallup’s 2014 Economy and Personal Finance poll, the top financial concerns of millennials are student loan debts, lagging wages, housing and living costs, bills and credit cards/debt and lack of employment.
 
Despite your current expenses, it is not too early to consider retirement planning. And there are some steps you can take to start saving right away.
 
Budget: A budget that prioritizes savings can help you take a closer look at your recurring and nonrecurring expenses each month to set aside a reasonable amount.
 
And the first step in prioritizing savings? Taking a look at retirement plans available to you.
 
Retirement Plan Types
401(k): Some retirement savings accounts offer good tax advantages and investment opportunities. In fact, many employers offer programs like 401(k)s that contribute to the plans on your behalf. This is a retirement plan that you can start investing into right away.
 
IRA: A traditional IRA is a tax-deferred retirement savings account. This means that you only pay taxes when you take the money out at retirement. The advantage here is that you do not need to pay taxes on any of the dividends, compound interest payments or capital gains you earned over the years until you withdraw your money. However, for both 401k’s and IRA’s any amount you withdraw before age 59 1/2 will typically subject you to income taxes and a 10 percent penalty.
 
You may also have heard about Roth IRAs. The difference between the two is that traditional IRA contributions are state and federal income tax deductible for every year you contribute, but you pay income taxes when you withdraw at retirement age. Roth IRAs are not tax-deductible, but like traditional IRAs their growth is not taxed. Unlike traditional IRAs, however, your withdrawals at retirement age are not taxed.
 
Invest: In addition to retirement plans, you may want to invest for long-range goals like buying a house or other major asset. Remember, different investment vehicles come with different expenses and charges. That is why you may want to look at investments like index funds and mutual funds or even annuities with low expense ratios across a wide range of asset classes for diversification.
 
Retirement Savings: How Much?
It depends on your goals, lifestyle, cost of living and various other factors.
 
15 percent: One rule of thumb is to save 15 percent per year.
 
8 times: Another rule is to save roughly 8 times the amount of your final salary. For instance, if your ending salary is $75,000, you may want to save around $600,000.
 
70 percent: A third common rule is to replace a minimum of 70 percent of your pre-retirement income, which is the average income for roughly the last ten years leading up to retirement. Seventy percent is an estimate, but the point is that retirement can be expensive. So that number may be a good place to start in order to maintain your standard of living.
 
Retirement and Financial Priorities
Retirement saving is difficult when so many other financial issues might seem like they should have priority. Saving, let alone investing, may not seem feasible as you try to make ends meet.
 
But not saving early for retirement may put you at risk of having to retire later than you want or under less-than-ideal circumstances.

For more information, please see https://www.massmutual.com/individuals/educational-articles/index.

For more information, please contact Howard Wolkowitz at HWolkowitz@mycoastalwealth.com or (954) 558-3673.
 
© 2016 Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001
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