Retirement Is PossibleDon’t believe us? You’re not alone. Most millennials and Gen Zers think retirement is out of reach.
Start YesterdayIf you want to retire on a yacht at 65, you have to start saving now. The sooner you start, the better off you’ll be.
Make the SwitchThe little things add up. Switch to a credit union for better interest rates and fewer fees and put that savings toward retirement.
Millennials and Gen Z often approach saving for retirement in one of two ways:
- they think it’s impossible
- or they assume they don’t need to start saving right now
Both are wrong.
But if you’re wondering when to start saving for retirement, the answer is “the sooner you start, the better off you’ll be in the future.”
Yeah, we know what you’re thinking. “Do these guys think I have disposable income to be putting aside? Why would I deprive myself of something now for something that is so abstract and far in the future?”
Well, you know how when your alarm goes off every Monday morning and your first thought is, “Ugh, I can’t wait ‘til I’m retired.” If you don’t save now, you’ll be working way past retirement age … you won’t have a choice.
Saving for retirement isn’t where you want to be putting your funds when the iPhone 12 is on the horizon, but just think! You’ll eventually have the iPhone 1200 to take pictures of you sailing — your white hair and wrinkles perfectly captured in high definition.
1. Set a Goal — How Much Will You Need?
Before you determine when to start saving for retirement, set a goal.
Setting a goal for retirement can be difficult when the economy and your own lifespan are so unpredictable (morbid, we know).
So how can you determine how much you personally will need?
Let’s say you’re relatively comfortable on your current salary. The general rule is that you’ll need to save 80% of that and then multiply it by the average life expectancy post-retirement, which is about 20 years if you retire at 65.
Here’s a simple calculation:
(Your Income x .8) x 20 = your retirement savings goal
Ideally, you’ll save even more than that in case you live to be 90 or 100. (There’s really no light, happy way to put that — sorry.)
2. Open an IRA
In addition to opening a credit union savings account, many credit unions offer IRAs.
There are two different types of IRAs. Traditional and Roth. Here’s the main difference:
Traditional IRAs: when you make a contribution, it is tax deductible that year.
Roth IRAs: your withdrawals during retirement are not taxed.
Some people have one or the other. Others have both. It all depends on whether you think your tax rate will be higher or lower in the future and which you qualify for.
3. Spend Less
Please don’t roll your eyes at us — we’re sensitive.
Spending less money sounds like a “duh” thing when you’re trying to save for retirement. But if you’re like us, life gets in the way and we forget to reevaluate our budget on a regular basis to see where we can cut back.
And if we’re not reevaluating on a regular basis (say, quarterly) little things can creep up on us – that Disney+ subscription, for example…
To be honest, though, we’re a little tired of people telling us to give up all the things that keep us sane and happy just to save for retirement. We want to have fun, too. We want an Avengers marathon! And no Spotify ads!
Luckily, there is another way to save on these things.
Think about it:
If you’re trying to save money for retirement, you better believe your friends are, too.
So instead of paying $9.99 for that Spotify Premium account, why not gather six of your friends to split the Spotify Premium plan. It’s $15 — split that six ways and you each save about $7.50 every month.
That may not feel like much, but that’s $7.50 more a month that you can save or invest through your credit union or an app like Acorns.
Do the same with Hulu, Netflix and any other shareable monthly subscriptions you have and you could save a good chunk of moolah.
There are plenty of other little ways to save, too. You don’t have to sacrifice all the fun things in your life just to save for retirement.
Surprisingly, student debt isn’t the main reason Millennials and Gen Z feel they’re unable to save for retirement. It’s the housing market.
This sucks particularly bad because housing prices are constantly rising, and it’s largely out of our control. And rent-controlled areas are few and far between.
It may not be an option for everyone, but downsizing or moving to a cheaper neighborhood can make a huge difference in your ability to save.
Or if you live alone, finding a roommate has the potential to cut your monthly rent in half.
But before you make the leap to that neighborhood that’s a little further from your work, do some calculations. If you rely on public transportation, will you need to pay more for a monthly rail pass if you move further away? If you have a car, will the increased fuel budget outweigh what you’re saving on rent? Determine if moving will truly help you save in the long run. If it does, go for it!
If you’re lucky enough to be able to afford a downpayment and then a mortgage, you might consider buying a house and renting out a room. It’s just like having a roommate in an apartment except you’re the landlord and can control the rent rate. And because houses appreciate over time (unlike cars) buying a house is considered an investment.
Even with all these budgeting hacks up your sleeve, nothing changes the fact that saving for retirement is daunting and it’s difficult to know when to start saving for retirement. Thankfully, there’s one type of financial institution that exists purely to help you meet your retirement goals rather than make a profit off you: credit unions.
From better loan rates to more personalized service, credit unions are beneficial for many reasons. And one feature is particularly useful:
A Credit Union Savings Account
When it comes to saving for retirement, every little bit counts. And we mean every. little. bit.
That’s why credit unions are so great: they help you save in dozens of seemingly small ways that really add up down the line.
Credit unions are not-for-profit financial institutions, unlike banks. That means there’s no stuffy bankers sitting in a conference room trying to make money off you. Instead, credit unions are owned by you and the other members.
Because your money isn’t going into anyone’s fancy suit pockets, it can go right back to you and the other members in the form of:
- Lower interest rates on loans
- Lower fees (or sometimes no fees at all)
- Higher interest rates on savings accounts
- Services like financial literacy programs that help you save even more
So if you’re wondering when to start saving for retirement, the answer is now.
And all of the savings you can have from the above strategies adds up over time and then compounds. Combining all those dollars you save through shared Spotify accounts and an additional roommate with your credit union savings account can really pack a punch and give you the head start you need to save for retirement.