Yahoo Finance 6 Tips To Save Like Millionaire Gen Zers
A GOBankingRates survey found that 3% of Gen Z adults (18 to 24 years old) already have over $1 million saved for retirement. If your retirement savings balance is significantly lower, you’re not alone. The survey revealed that 97% of Gen Zers have substantially less saved, with 22% having between $10,000 and $50,000, 24% having $10,000 or less and 41% having no retirement savings.
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You aren’t necessarily doing anything wrong if you’re part of the 97% (unless you aren’t saving anything). However, you probably can be doing more to accelerate your retirement savings. Here are some of the best ways for Gen Zers to start to get serious about saving for retirement.
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How To Get Started Saving for Retirement
Retirement might be a distant goal, but an early start will allow you to save gradually over time while taking advantage of compound interest, which means earning interest on your earned interest. Take the following steps to start growing your retirement nest egg.
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Open a Retirement Account
Start with an employer-sponsored retirement account such as a 401(k), 403(b) or SIMPLE IRA (if your employer offers one and you’re eligible). With these plans, you typically select a percentage or set amount of your pay that is automatically deducted and deposited into your retirement plan each pay period.
Many companies also match employee retirement plan contributions up to a specified percentage of your total salary. Each employer contribution is essentially free money that can help you considerably boost your retirement savings over your working years.
If you don’t have access to an employer-sponsored plan, consider starting a traditional or Roth IRA. You can easily open and contribute to one online.
Get Educated
Each type of retirement account has different rules, contribution limits and tax benefits, including how your money grows. The more you know about your retirement account, the better you can maximize your savings efforts. Take time to learn how your account works, from how much you can contribute to how you can invest your funds.
Review and Adjust
A retirement account is not the type of savings account you should set and forget. Periodically review your account to determine whether you should make any changes, especially as you learn about the various investing options available for your account.
Ways To Accelerate Your Retirement Savings
Once you become comfortable with how retirement accounts work, consider accelerating your savings efforts with additional accounts and professional advice.
Increase Your Contributions Annually
Ideally, you would contribute the maximum allowable amount to your retirement accounts annually. However, this isn’t usually possible during your early working years.
Instead, gradually increase your contributions over time, focusing first on your employer-sponsored plan until you’re receiving the full match. Then, focus on growing other retirement accounts. Increasing your savings rate annually by even 1% can significantly affect how much you have when you retire.
Maximize Retirement Account Tax Benefits
It’s wise to not limit yourself to one type of retirement account, according to experts. Contributing to the right combination of accounts will allow you to increase your overall annual contributions and get tax benefits now and in retirement.
Contributions to a traditional IRA, 401(k) or 403(b) allow you to invest tax-deferred dollars. So, you can deduct eligible contributions on your annual tax return and defer paying taxes on the funds until you withdraw them. The Roth equivalents of these accounts allow you to invest after-tax dollars but make tax-free withdrawals in retirement.
Another tax-advantaged account to consider if you’re eligible is a health savings account. An HSA allows you to contribute pre-tax dollars to save for and pay for qualified medical expenses tax-free before and in retirement. However, after age 65, you also can use the funds for non-medical expenses, although you’ll pay income taxes on such withdrawals.
Get Professional Financial Advice
The more retirement accounts you have and the bigger your retirement nest egg grows, the more critical it is to seek professional financial advice. Consider creating a personalized retirement plan with the help of a certified financial planner. A CFP can help you maximize your retirement savings and ensure your savings goals and strategies are well-aligned.
Good Financial Habits Can Help Boost Retirement Savings
Whether you’re just starting to save for retirement or ready to accelerate your savings efforts, good financial habits can help you reach or surpass your retirement savings goals. So make sure saving for retirement becomes and remains a priority, and try to increase your contributions each year until you’re reaching annual limits. Saving gradually over several decades is usually much more manageable than catching up on retirement savings when you’re older.
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This article originally appeared on GOBankingRates.com: 6 Tips To Save Like Millionaire Gen Zers
