Posted by Advanced Accounting & Tax Planning

Things a Millennial Needs to Know Before Retirement

Things a Millennial Needs to Know Before Retirement

It’s probably the best time to start thinking about retirement if you are in your twenties and haven’t thought about it even once. It is indeed a fact that retirement is so easy to imagine that the millennial generation hits retirement age, we’ll all be living in an unbelievable and almost like a sci-fi environment where robots take care of the elderly and health care is less complicated, and yes it’s still far away. But, careful planning long before you can enjoy your golden years is required in the real world.  

When you consider the fact that retirement today will almost certainly look different from retirement a half-century from now, then that planning takes on new urgency. More people are working past the age of 65 just to get by, climate change is threatening many popular retirement destinations, life expectancy is getting longer, and people are less likely to get married or have kids. As you begin to outline your road map to retirement, below are the things you should consider. 

Social Security won’t be enough, but it will still exist

By 2034, it is estimated that our Social Security trust will be gone. That doesn’t mean that by the time millennial are eligible to receive the money, there won’t be any. A surplus of Social Security funds to fall back on won’t be available anymore. In the future, the fact that a majority of Social Security pay-outs come from taxpayers will remain true. 

“If things stay on the current course, future generations are likely to get a lot less money in their payouts”, according to the author of the book Get Money and finance writer Kristin Wong. This means that in your budget planning, Social Security definitely won’t be enough to live on and to be considered as a major factor. Prepare for the worst and do whatever you can to avoid depending on Social Security; save like your retirement depends on it because it kind of does-- Wong advised. 

Despite climate change, it is still possible to retire somewhere nice  

Sea levels are rising, warm places are getting too warm, and it is getting warmer in cold places. Today’s warm coastal retirement hot spots will not be the same in a half-century because of the growing threat of climate change wherein it will be too battered by extreme weather and rising waters. 

According to Matthew E. Kahn, there will still be plenty of alternatives that will fill the void when you think of a typical retirement destination and the image will have a big difference in reality. Fifty years from now, Americans’ population over the age of 65 will be roughly 100 million which is more than double today’s number, and that’s according to Kahn who specializes in how our economy was influenced by the environment. This means more places will compete to be where seniors should go to spend their hard-earned retirement money.

Kahn said that each person has his or her own conception of ‘good life’ and you will definitely find the right ‘ecosystem’ for you.

Later in life, challenges will come with total independence

A rise in so-called elder orphans, seniors with no spouse, children, or other immediate families because of a growing number of adults are choosing not to have children, and more and more young adults are opting not to get married or partner up, according to the U.S. Census Bureau. 

Wong suggests that you have to be extra diligent in saving now for additional costs that will come with independence later in your life if you suspect that you will be one of the people mentioned above. Expenses that can be shared by a partner or lessened by your child/children shouldering some of the burdens such as long-term care insurance, elder care, and other expenses. Better invest as early as you can and as much as you can. 

It will not be a surprise to see people at an old age still working

Wong pointed out two major problems with relying on the approach of the common rule of the thumb which was to save 10 percent of every pay-check. First, with the uncertain future of Social Security, 10 percent probably is not enough to cover the cost of living in retirement. To be able to get a sense of what you can comfortably manage and what sort of timeline best puts you on, using a personalized retirement calculator will help you figure out how much you should be saving. 

There’s a difference between what you can actually save and what you should be saving is the second problem. Socking away any amount at all is more difficult than it once was with rising debt and housing costs. And, with the issue of having longer life expectancy over the next several decades is an issue because a longer life means longer retirement. Compared to today’s retirees, you will need enough savings to sustain yourself longer. 

Out of financial necessity, despite being past the retirement age, many Americans believe they will have to continue working. A good chunk of them already does, according to the Bureau of Labor Statistics. That pattern is likely to continue for millennials. 

Being paid what you deserve at your current job and any future jobs you will have can help you save for retirement now even if it all seems bleak. You have to think that the potential happiness of your golden years is a powerful motivation and obstacles that you will face today are just challenges. 

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