Putting off saving for retirement is kind of like dreading a visit from your in-laws. That day is going to come, so you might as well be as prepared as possible.
With National Retirement Security Week upon us, here are Rewire’s greatest hits when it comes to getting started on your nest egg. It’s never too early to start saving, but, don’t worry, it’s also not too late.
When it comes to investing, many young people just don’t know where to begin. A 2012 study of millennial financial literacy by PricewaterhouseCoopers found that only 24 percent of 5,500 people ages 23 to 25 had basic financial knowledge.
This lack of understanding about finances coupled with the unique challenges faced by millennials when it comes to money has created a population of young adults who know they should be doing something with their money to save for the future, but aren’t sure what.
Hannah Cole has pieced together a pretty varied living for herself. During tax season, she’s in high demand for her expertise on the subject. But the rest of the year, she’s a professional artist—a painter, more specifically.
Earlier this year, Cole traveled to New York City to combine her two passions and teach tax workshops to other creatives.
“When I talk to artists it’s like the most fulfilling part of my job,” she said. “The arts community has been there for me so I feel really grateful for that community. It’s really great being in a room full of artists who have questions and helping each other.”
Not to freak you out, but if you’ve graduated from school and are making money in the working world, it’s time to start putting some away for later.
There’s no hard and fast number for this, but CNN Money suggests you should expect to live on 85 percent of your working income as a retired person. That means you need to have 85 percent of your working income available to you every year once you retire, whether that’s through prior saving or some other method (everyone’s financial and work situation is different).
How you do it is up to you; there are lots of experts out there with strategies for you to consider.
Here’s a new one: It’s an unwritten financial rule that young adults in lower income brackets should be putting money into post-tax retirement accounts (meaning the income is already taxed when it goes into the account), like Roth IRAs. Older, more wealthy people should be making tax-deferred investments (meaning the money is taxed only after it’s taken out) into traditional IRAs and 401(k) plans.
Student loan payment. Car loan payment. Groceries. Gas. The list goes on.
Expenses can add up quickly each month and before you know it, your paycheck is spoken for.
If your financial situation is like that of most people who are just getting started as adults, it can feel like there is never enough money coming in and always way too much money going out each month. It can feel nearly impossible to “get ahead,” let alone build an emergency fund, adequately save for retirement, or scrape enough money together for a down payment on a house.
Katie Moritz is Rewire’s senior editor and a Pisces who enjoys thrift stores, rock concerts and pho. She covered politics for the daily newspaper in Juneau, Alaska, before driving down to Minnesota to help produce long-standing public affairs show “Almanac” at Twin Cities PBS. Now she edits and writes the articles that appear on Rewire, and works with its pool of freelance journalists. She has also written episodes of PBS Digital Studios series “Sound Field” and “America From Scratch.” She’s the host of the history webseries “30-Second Minnesota,” which was nominated for an Upper Midwest Regional Emmy Award. Reach her via email at [email protected] Follow her on Twitter @katecmoritz.