Contrary to popular belief, there is hope for the millennial generation – at least when it comes down to retirement savings. Studies have shown that the median millennial retirement fund increased by 400% from 2007 to 2017, a growth that far surpasses that of the Baby Boomers and Generation X.1 Additionally, Millennials start saving for retirement, on average, at the early age of 24. Gen X and Baby Boomers didn’t start saving until an average of 30 years old.2
In fact, there is an entire movement amongst frugal young Americans referred to as the “Financial Independence/Retire Early” movement or FIRE. The driving force behind the movement is to encourage and support the youth of America in their efforts to live sensibly and save a high percentage of their income to achieve financial independence at a faster rate down the road. 3
According to Transamerica Center for Retirement Studies, 80% of Millennials are skeptical about Social Security and concerned that they may never see their benefit.5 This may be one of the reasons why FIRE has become a widespread trend among the younger generation.
The basis of this trend is simple: it all depends on how you save, spend and invest.4 Some of the key points about achieving financial independence and longevity include:
- Maximizing savings and reducing spending
- Invest knowledgeably and mindfully to grow your assets
- Fully understand the challenges
Reduce Spending for Maximum Savings
One of the easiest ways to maximize your savings is to decrease your expenses. Keeping track of your spending is a great way to visualize the dollars you spend on non-essentials. It’s imperative to be honest with yourself about your spending habits, as well as making goals that are reasonable and reachable for your lifestyle – both now and into the future.
Saving is just one part of the equation. Investing your savings to build your assets is a great way to accumulate more funds for retirement. Making knowledgeable investing decisions gives people the opportunity to positively impact their finances, but it is vital to work with someone how is educated in the field of investing.
Be sure to take into consideration the different aspects of retirement, such as health insurance. You are unable to register for Medicare until age 65, so if you retire at 40, you will most likely need to purchase insurance from a private market. Purchasing from a private market can be expensive, and it’s important to that in mind.