There are a lot of young people that are not properly thinking about their retirement. The day that you’re going to have to retire seems so far off early on. 60 or 70, you’re never going to be that old right? So why save today?
Or, what if you just plan to continue working? Why save when you’re planning on continuing in your job beyond the traditional retirement ages of 60 or 70?
Neither of these scenarios are very realistic, and yet it’s somewhere that many people find themselves. As David Giertz points out, 1 in 8 millennials do not have a firm retirement plan in place, and are saving almost nothing for the day that they will have to retire. That’s not good.
When you break down the numbers, David Giertz shows us that one in eight millennials has a plan to work until they die. That’s because under the weight of crushing college debt, and a slow to move economy, many feel that they will have no other choice.
The outlook for many other millennials isn’t much better either. Giertz points to a study in Merrill Edge, which suggested 1 in 5 millennials thought they would need to win the lottery to afford to retire at a traditional age. This is in large part due to the fact that so few believe Social Security will still be there when they need it. As a result, we end up with a generation of youth that have paid into a system they may not be able to benefit from.
What’s the solution? Taking retirement seriously right now.
David Giertz also points to the fact that more millennials are concerned with important things like jobs that offer 401(k) plans. In fact, they are more likely to consider them, than generation X’ers, or baby boomers. What’s more, millennials are also saving younger, with many starting to save a portion of income at age 22. Another remarkable achievement that shows most people are on the right track at least.
So where do they go wrong?
Well the first is that they are not saving enough. While many people realize the necessity to save, they don’t realize how much they are supposed to be saving. David says that while the vast majority of millennials are saving some of their income, it amounts to about 6% of yearly income saved. Whereas you would need to typically save around 25%, in order to retire at a traditional age between 61-65.
Giertz also points to a report in BlackRock, that suggested a slow economy for decades to come, which will necessitate a higher saving rate than normal to weather the storm.
Second, many millennials do not turn to financial professionals. Speaking to somebody with decades of experience in saving and retirement planning like David Giertz, you realize that this is a mistake immediately.
Nearly 1 in 3 millennials have a deep distrust of the financial system, having lived through a massive financial collapse in 2008. That’s why so many instead turn to less informed sources like friends, or family members. Instead, trading the experts for people in their lives that they know they can trust. The problem being, friends and family are not very well informed about financial strategy. Things that are important like the most recent laws and regulations, not to mention taxes, and a plethora of other issues that come with long term financial planning.
The main points that David Giertz would suggest to put your course on the correct path are as follows:
- Talk to a financial professional.
This is the most important, because it means getting advice from somebody that knows what they are talking about. Whether you go to a trusted industry insider like David Giertz himself, or another similar place, it’s of vital importance that you find somebody with the proper expertise to provide insight for your unique situation.
- Determine what type of life you want to live.
This is vital, as it’s all about where you want to retire, what type of home you want to live in, etc. You need to make long term plans so that you can deal with your financial situation. Are you planning on renting your entire life? You may need a lot more savings to offset the cost of rent. These are the types of things you have to carefully consider, to even begin to know how much money you need to save in the first place.
- Admit that you may have to take a limited role late on.
Some 83% of millennials believe that they will be working late into their lives. Sometimes, you’re not wrong. But there are different types of jobs that could be beneficial. There are helpful hobbies, like fixing up boats, etc that can bring in money. Or there are tons of options online to bring expertise and insight that just weren’t available in the past. It’s vital to recognize your opportunities, and plan accordingly so that you don’t end up in a position of having to just take what’s available in your old age.
- Diligence in saving money
Yes it’s cool to have the new phone, or the newest videogame console, or a huge 4K television. But as David Giertz will tell you, it’s a lot smarter to be patient about these things. If it falls outside the 20-25% you need to save each year, then just wait. Wait for sales, wait for next year, etc. The things you want are still going to be there, and you don’t need to overspend on them today. Be happy with what you have, and utilize that patience to make sure that you can have a better tomorrow.
See continued financial advice from David Giertz by following him on Twitter, or check out his website for more information on how you can plan for things going forward: http://officialdavidgiertz.com/
Also, check out our previous feature on David, which you can read here: Even Bros Retire: Ohio Investment Advisor David Giertz Has Some Ideas To Get You Prepared