Retirement Strategies for Gen-Y

Retirement appears to be a long way off, and you have decades to prepare. However, in order to live a long and financially secure retirement, you must begin saving today.

While it's a popular misperception that millennials aren't good at saving money, a little above 50 percent say they do. Seven out of ten people consider themselves savers rather than spenders, and they are now prioritizing an emergency fund or a vacation.


Despite these beneficial behaviours, some people put off planning for retirement. While saving for an emergency fund is crucial, waiting to invest in retirement may not be the best option. Eighty percent of Millennials do not believe they will be eligible for Social Security when they retire. If you are just adding money to your savings account and not investing them properly while keeping your retirement plans in your mind, you might end up losing not only your retirement benefits but also, a large number of tax benefits.


What are the alternatives available to you?


401(k) - This is an employer-sponsored retirement savings plan. You can pick how much you want to deduct from each paycheck before taxes, and many companies will match a portion of your contributions. Your employer's fund manager normally chooses the assets; however, you may have some say in whether you choose an aggressive or conservative strategy. If you work for a non-profit or government agency, you may have the option of contributing to a 403(b) instead.


IRA – An individual retirement account, just like a 401(k) is a tax-deferred retirement savings account. This account can be set up independently as well as offered by an employer. The contribution you make each year has a cap in the case of an IRA. However, you have considerably more independence as to how you invest your money.


Roth IRA – A Roth IRA is funded with after-tax dollars, that is, the withdrawals you would make after retirement would be tax-free. The contribution limit for a Roth IRA is smaller than your contribution limit or your taxable income for the year.


How Risky is it to invest my money?


Investments are often considered to be risky as the markets can often get quite volatile. According to a few studies, millennials are not fond of investing as they are scared that the volatility of the markets will lead to the sinking of their funds. However, they do not realize the investment returns they are missing because of this.


Millennials have a significant amount of time before they retire. Hence, they should not worry about the movement of the markets. They have a lot of time to recover in case their investments go down. Additionally, you are not expected to do all your investments on your own. It is always better to discuss your plans with your financial advisor. They can help you decide on investments that would align best with your risk-taking ability.


How much money do you need?


Quite a few young professionals have estimated that they would need about $400,000 saved for their retirement. Although, about 50% of these admitted that they guessed this value.


The goals and needs of a person differ from the other. There is not a single plan which would fit everyone’s needs. Hence, a good way to start would be by writing down a financial plan.


A good practice would be to write down your goals, needs, retirement plans, long-term healthcare needs, and government assistance. It would be best to consult a financial advisor who would help you keep a track of your goals and finances while carefully creating a plan which would make your life easier and stress-free.


Feel free to reach out to us if you want any financial assistance from us regarding your financial plan or investments. You can email us at info@dunhillfinancial.com or visit our website at https://www.dunhillfinancial.com/.


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