Retirement Savings By Millennials
Retirement Savings – Issues That Worry Millennials
Just when you thought that retirement savings meant putting away as much money as you needed for your lifestyle…now, making plans for unknown factors creeps in.
For the millennial generation, unfortunately, much is unknown. There are four primary concerns that we will list here and then elaborate later on:
1. Will social security and Medicare survive?
2. Will they have to take care of their elderly parents?
3. What will future health care costs be?
4. Are their retirement funds being managed properly?
Knowledgeable financial planners say that millennials, and for that matter, anyone else, should begin to save for retirement as early as possible. This is even more important today, as compared to a decade ago.
A report done by Transamerica indicated that about 52% of millennials simply estimated the amount of money that would need when they retired. In that same group, only about 10% used a spreadsheet or a calculator to arrive at their number.
A number of negative issues face millennials. Student loan debt is higher than any other preceding generation. Salaries are lower than preceding generations for their age group.
A new term now associated with this age group is the “sandwich” generation. What this means is they will not only have to support themselves and their children, but probably their parents as well.
The outlook is not very rosy as indicated in a Wells Fargo survey of over one thousand millennials. Roughly 64% of them stated that there was no way they could amass one million dollars in retirement savings in their lifetime. More depressing was a consensus that this group expected to work until age 90.
With all this negative connotation, is there any good news? Well, yes. The sooner that a millennial begins to save, even if it’s only a few dollars a month, the better shot of having a comfortable lifestyle in retirement.
Planners pretty much agree to begin saving even a small amount and by doing so, a good habit of saving develops. Plus, with interest compounding, even the small amounts will build up. By developing a saving habit, they can put a little more away when they get a raise or a windfall.
Most millennials still appear confident in their ability to save. It’s best to be ultra conservative though, and by doing so, they can save more and also plan for the four unknowns listed above.
Social Security and Medicare Benefits Stop
Roughly 81% of millennials surveyed by Investopedia stated that they didn’t expect to receive any benefits from social security or Medicare. The current program provides for benefits as low as age 62 and much debate is being made as to the future of the program. Some suggest that the retirement age should be raised to age 76 for full benefits.
Their reasoning is that individuals are healthier longer and are working well past their normal retirement age. Perhaps by raising the retirement age, the system may be able to benefit the millennials. In any event, it is suggested that millennials begin to save now just in case. Easy to say, but very hard to do, say many.
Your Aging Parents Will Need Your Help
Over a third of Americans feel that their parents will need their financial help within the next 7 years. One of the reasons for this is due to high mortgages being taken into retirement by the parents. Some young millennials are already making plans to help their parents financially.
Financial experts suggested that the parents be shown how to open HSA accounts in addition to saving to cover future medical costs. Another recommendation was to help by opening Roth IRA accounts and helping with paying taxes on converting Traditional IRAs to a Roth.
Unknown Cost for Health Care
Another Investopedia survey indicated that over one-half of respondents who were over 50 years of age, had a lot of concern about delaying their retirement. This was due to the government impact on policies plus the lack of retirement savings needed to cover their health care.
Ever since the illusion that Obamacare was a positive step in the right direction for healthcare, many were and still are having severe difficulty paying the premiums. Many believe that healthcare costs have been seriously understated for years.
In today’s world, many couples are very close to $350,000.00 for healthcare in retirement. Many have difficulty being able to afford healthcare and don’t take of themselves as they should. Some skip necessary medical tests and others don’t bother getting a prescription filled.
Concern that Employer or Financial Adviser is Mismanaging Retirement Savings
All too often, high and too many fees plus mismanagement of your retirement savings, are detrimental in reaching the number you strived for at retirement. The government hasn’t been of much help in this area either.
A Fiduciary Rule was created by the government to put a stop to the excessive fees and to make management of the funds more transparent. Well, for whatever reason, this has been delayed. The Department of Labor has estimated that seventeen billion dollars of retirement savings are lost each year due to conflicts of interest in investment advice.
What a sad commentary for taking care of the elderly. The inept government advises retirement savers to review their accounts to spot any problems. I seriously doubt if 25% of these savers would be able to know if their account was mismanaged or down because of a market fluctuation. We need some very serious intervention in policing retirement savings, and not by self-serving government bureaucrats.