Millennials: Are you on the right track for retirement?

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According to Millennials and Retirement: Already Falling Short, a report by the National Institute on Retirement Security, 66.2% of working millennials have nothing saved for when they stop working. While I understand the financial hardships millennials face, not putting away a penny for the future is downright unfathomable. (This is just one of the things millennials get dragged for — here are more.)

The stats on millennials saving for retirement

The report suggests millennials should be saving 15% to 22% of their income for retirement, which is quite a lofty goal. And the 14.2% of millennials who have savings do sock away 15% or more of their salary, including both employee and employer contributions.

However, the remaining 85.8% of millennials who have savings contribute less than suggested. In fact, 53.8% of that group is saving just 9% or less for retirement, including employee and employer contributions.

And 40.2% of millennials say that they don’t contribute to a retirement plan because of eligibility requirements. Some employers require you work a certain number of hours, be a full-time employee or work for their company for a set number of time to qualify for an employer-sponsored retirement plan. Meaning, millennials who work part-time or who don’t have the necessary tenure at a company may not qualify for a work-based retirement plan.

What does this mean for you?

If you’re a millennial saving 15% or more of your salary for retirement, you’re ahead of the game. That said, rather than compare yourself with others, measure where you are in relation to your retirement goals. There’s a chance saving that percentage isn’t enough to reach those goals and you need to step up your game (unless you plan on working forever).

Starting earlier is better

The earliest years in your career are the best time to start saving for retirement, thanks to compound interest. People are likely to most regret missing out on this optimal time down the road.

Below is a simple chart that shows the impact of delaying retirement saving. In this example, let’s say a person saves $50, $250 or $500 per month for retirement and earns a conservative 6% return on their investments every year. How much money will each investment yield after 10 years, 20 years, 30 years or 40 years?

Here’s another example, in which a person saves for only 10 years — from age 25 to 35 — and then doesn’t contribute another dime before age 65.

If somebody starts saving for retirement at 25, stashing away $500 per month for 10 years yields $481,471. Meanwhile, saving $500 per month for 30 years would yield $502,810. The 30-year savings plan beats out the 10-year one by just $21,339. However, the person who saved for only 10 years early in life contributed just $60,000 to end up with their final amount, while the person who saved for 30 years contributed $180,000 to end up with theirs.

Here are some retirement calculators you can check out to help you figure out your retirement plans.

The easiest way to start saving for retirement

In my experience, the easiest way to start saving for retirement is to set aside money from your first paycheck. From there, continue to put away as much as possible for retirement, aiming for at least the suggested 15%.

I began to set aside money for retirement during my first job after college, but I decided to save only 10% of my salary at the time. It was super easy because I wasn’t used to making any money at all, so I never missed the negligible amount that I was putting away. In retrospect, I wish I had contributed even more, because once you get used to your take-home pay, parting with more of it is a tough task.

Pulling off the Band-Aid

If you’re already working and not saving for retirement — or not saving enough — it’s time to pull off the Band-Aid; start saving whether you think you can afford it or not.

It's amazing how much further your money will go each month when you have to make it work.

Start by saving a small percentage of your income — maybe even as low as 1% to 5% if you really don’t think you can afford more. Then set reminders for a predetermined interval — such as each month, quarter or year — and increase your retirement contributions by another 1%, 2%, 5% and so on.

If possible, set up automatic increases to your contributions through your workplace retirement plan. That way, you can’t forget to increase your contributions. In fact, you may not notice that the money is missing at all.

You can save even on a small salary

Perhaps you’re thinking it’s easy for a person earning $75,000 a year to start saving for retirement, but what if you’re making $30,000 a year? While your circumstances will determine how difficult it is to set money aside, it’s still important to get the savings habit started.

It's not just retirement they're struggling with. Millennials are also making this big mistake with insurance.

You don’t have to use a work-based plan

If you don’t have a work-based retirement plan, it’s easy to use that as an excuse to avoid saving for retirement, but that can be detrimental. Instead, open a traditional or Roth IRA with a brokerage firm or robo-adviser that lets you start an account with no minimum. Then simply set up automatic contributions to the account, scheduling them to come out of your bank account a day after each paycheck. These accounts do have maximum annual contributions, but even after you reach those, you can open a regular brokerage account and continue to save money there.

Saving for retirement is tough because it is the ultimate example of delayed gratification. The money you put away now probably won’t be used for 30 years or more. However, it’s crucial to start saving early so you can ultimately live a comfortable retirement.

Retirement accounts are often offered by employers. But what if you striked out on your own? We've got a guide on how to build your own benefits package here.

Image: aldomurillo

This article originally appeared on CentSai.