Are you saving enough?
Posted On July 28, 2015
Are you saving as much as you should be for retirement? If you’re a typical American – and particularly a typical American millennial – probably not.
A recent study on retirement saving and spending by T. Rowe Price found that millennials are saving an average of only 8 percent of their salary for retirement, just over half the recommended 15 percent.
In light of this, the Fiscal Times offered strategies for millennials to increase that figure. Most of them are common-sense things that apply to people of all ages – cutting costs, budgeting and prioritizing expenses – though many millennials have the added expenses of student loans that make it even more burdensome to save.
And yes, that $3 cup of Starbucks is a luxury, not a necessity, for all three age groups.
Also suggested, however, was a tip that may be somewhat less intuitive for Gen Xers and especially Baby Boomers – using apps like Mint and LevelMoney to track spending habits. Seeing the data of where your money goes may make it easier to pinpoint areas in which you can cut back.
Other specific suggestions:
- Try increasing your saving for three months. Small incremental increases may not be felt as harshly as an all-at-once plunge.
- Avoid lavish changes in lifestyle with salary increases. High-salary workers can be living paycheck-to-paycheck just like minimum-wage earners if their expenses are high.
- Have your savings automatically deducted from your paycheck. If it never hits your checking account, you’re less likely to miss it.
- Be sure to take full advantage of your employer’s 401(k) match.
Mark Kantrowitz, senior vice president & publisher at Edvisors.com, advises millennials to be salting away a fifth of their salaries for retirement, a figure that may seem high but one that’s advisable for those who plan on doing more in retirement than watching the rest of their lives go by from the porch.
To do that on most typical salaries, however, luxuries must be reduced to a minimum. Do you really need the more expensive data plan for your smartphone? Are you eating out when you could be cooking at home? Do you really need to see that new movie in the theater, or could you wait and get it from the Redbox?
Get to prioritizing. And get to saving.