03-21-2014 01:20 PM
Millennials made something clear when they entered the USAA “Your Future You” contest: They have big plans for the future. The Facebook® and Twitter® campaign asked USAA members to submit a picture and written description portraying themselves in their retirement years. In their submissions, Amercia's so-called millennial generation – those ages 18 to 34 – revealed ambitious plans ranging from home ownership to becoming a baker to focusing on charitable work.
But will millennials actually be able to attain those dreams?
Retirement is one of the nation’s most pressing issues, no matter the age or generation. And for good reason. According to a study conducted by the Pew Research Center in 2010, for the next 16 years approximately 10,000 Americans will retire every day. And by the year 2030, nearly 20% of the U.S. population will have reached retirement age.
And there’s reason to believe that many Americans simply aren’t prepared for retirement. Today, nearly 60% of workers report that they have less than $25,000 in total savings and investments, excluding their home and defined benefit plans, according to a 2012 study by the Employee Benefit Research Institute.
For millennials in particular, retirement and financial planning pose some unique challenges. Some 65% of millennials haven’t started saving for retirement, says Gregg Rivas, executive director of retirement solutions at USAA.
“Even though it seems a long way away, millennials need to have a general plan and start saving today in some manner or another,” Rivas says.
New college graduates already are emerging into the workforce at a big disadvantage. The unemployment rate among millennials is higher than the national average.
These retirement woes are likely to be exacerbated by the frail economy, inflation and escalating health care costs.
Many millennials watched their parents and other adults suffer through the 2007-09 financial collapse, the worst economic downturn since the Great Depression that wiped out many Americans’ retirement savings and home values.
This seems to have rattled them enough to start taking some steps to improve their finances. Millennials’ median household debt decreased by 29% over the years 2007 to 2010, compared to older Americans who saw their debt fall by just 8%, according to Pew figures compiled in 2013.
Millennials are unusually optimistic about their financial future. More than half say that while they don’t earn enough money now to live the kind of life they want, they will in the future, according to Pew research. That’s compared to just 15% of baby boomers.
But simply imagining the “golden years” isn’t enough. Being financially fit for retirement requires hard work, thoughtfulness and planning. And it doesn’t have to mean living a spartan existence. There are simple steps that young people can take for tomorrow that don’t sacrifice their quality of living today.
Those working at a company should take full advantage of any employer-sponsored dollar-for-dollar match program, which is essentially free money. Starting early and setting aside even small amounts of money can make a big difference. For example, if a worker starts stashing away just $100 per month at the age of 25 and hypothetically earns 8%, they’ll have nearly $330,000 at retirement. If the same worker waited until 35 to start saving the same amount, there’d only be about $143,000 in retirement savings.1
While planning for retirement may not be glamorous, it can make a big difference in whether “Your Future You” will be able to take that trip to Thailand, do charitable work or fully live out your life’s passion.
“Millennials like to have options to be able to do things, to make a difference, to travel,” Rivas says. “The best way for millennials to do that is to ensure that they have financial freedom. Otherwise, their choices are going to quickly dwindle.”
In a recent interview, “Future You” contestant Domenica Rohrborn, pictured left, told USAA about her plans to open her own screen-printing studio.
“I've always dreamed of being a designer and screen printer,” Rohrborn says. “To help make it a reality, I decided to refinance my car with USAA. I would use the $5,000 to help me pay down that debt and purchase other equipment so I can take on large volumes of work, live my passion full time and create jobs for others.”
But she hasn’t yet started saving much for retirement, she says, because she hasn’t “had that sense of urgency.” But she’s hoping that her business will be just the kick she needs to start getting on track financially so she can plan for the future.
“Maybe I’ll even be able to retire early,” she says.
The submission period for the “Your Future You” contest has closed, but the voting period to select the winning submission from the five finalists will run through March 31. Visit USAA’s Facebook page to cast your vote for the winning entry.
1Examples given are hypothetical illustrations and not necessarily an indication of the benefits or features of any USAA product.
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