For many in their 20s and 30s today, putting aside money for retirement can feel impossible. Wages have been stagnant or falling for the last few decades, according to the Pew Research Center. And in addition to housing, transportation, and other living costs, many Millennials are paying off large student loans. According to a survey from the American Institute of CPAs, nearly one-third (29 percent) of college students with loans said the debt would make it difficult for them to save for retirement.
However, Millennials who put off saving may find they don’t have enough time to build a sufficient nest egg. The three tips below can help young workers set money aside without requiring a lot of sacrifice:
- Live below your means. It’s important for Millennials to set up a lifestyle that allows them to set money aside for emergencies as well as retirement. Housing is the single biggest expense for most households, according to the Department of Labor, so it makes sense to start there. Young people can save money on housing-related costs by living with roommates or in a less fashionable part of town. Transportation costs can be lowered by purchasing used cars or taking public transit whenever possible. And the use of credit cards can be limited by paying for things in cash.
- Save whatever you can. A Boston College study recommends saving 15 percent of income a year for retirement, but for many people—especially young people on entry-level salaries or new families—that’s not feasible. Instead, Millennials should aim to set aside whatever they can, even if it’s just $50 a month. Over time, compounding can help that money grow, and establishing a saving habit in your 20s and 30s can help ensure that habit sticks in your 40s and 50s.
- Invest wisely. You don’t have to watch the markets obsessively to get the most out of your 401(k) or IRA. The smart move is to invest in a diversified mix of stocks and bonds and choose low-cost index funds and ETFs whenever possible to avoid expensive fees.