Generation ‘Y’ – Retirement Planning Options

If you are part of Generation Y, you still have over thirty years until you are close to retirement age and if you have been paying attention, even a little bit, you will have heard that it is going to be harder for your generation than any other of the modern age.

The sad truth is that Generation Y’ers are going to get less help from the government and their employers than the generations of the past. This puts more of the retirement pressure on your shoulders. You have to invest smartly now in order to see the returns that will allow you to stop working as you get older.

Generation Y people will still need to have the IRA’s, 401k’s, CD’s and Money Market accounts for retirement, but at this point you need to put your focus, and your money, into riskier investments that have the potential to build your net worth faster. It’s even more important for Generation Y’ers to have a good balance of safe accounts and high risk accounts than ever before.

The retirement goal of a Generation Y’er should be between at least $1 to 2 million and this is shooting for a retirement age of 70. What that really means is a 25 year old will need to put away at least $7,000 annually with an 8 percent annual return. Does that feel a little daunting?

There are some things that you can, and should, be doing now to start getting you ready for that retirement down the road. It might seem far away, but the more you can do now to prepare, the easier it will be for you when the time does come.

• Employer Help – If you have the opportunity to have an employer sponsored retirement plan you should be taking advantage of it, and now. Every penny that your employer puts into your retirement account, is a penny that you don’t have to. With their help you can reach your retirement goals sooner.

• Get a Roth IRA – Most Generation Y’ers are in a lower income tax bracket. By putting money into a Roth IRA now, you are helping yourself with tax costs in the future. Every post-tax dollar you put into an IRA is tax money saved down the road when you start to withdrawal from that account.

• Deposit Accounts – These accounts are safe, which means that they don’t pay very high returns. Most deposit accounts interest rates are so low that they’re not really worth it. But every so often a bank will offer a special rate for a CD or Money Market account that makes it worthwhile. These are longer term investment opportunities that can help you to boost your savings along the way. You have to make sure to research the banks in your area and get the best rate you can find.

• Stocks – As a Gen Y’er you have a ways to go until you hit retirement age, which means you can take higher risks with your stock investments. If you don’t want to deal with stocks yourself work with someone that can help you. Keep in mind that this is still a risky business, but since you have a longer time to recover from any economic downturns you also have the potential to earn big too.

Overall you need to determine how much money you need to have and at what age you want to retire. By creating an end goal you can more easily see how you are going to get there. You can find many retirement calculators online to help you crunch the numbers and help you get on your way to a comfortable retirement.