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Blame their money woes on avocado toast, but the truth is that millennials have a large cross to bear financially. In addition to finding enough decent-paying work to cover the bills and managing heavy student loan debt, many are also struggling with saving for that seemingly far-fetched goal of retirement. While many of those born between 1981 and 1996 won’t be retiring for another 30-plus years, the sooner they can get a jump on saving up a nest egg, the better.

According to the National Institute of Retirement Security (NIRS), 66% of millennials have nothing saved for retirement. And a staggering 95% aren’t saving enough.

Why’s that? For starters, let’s take a look at the three-legged stool – the three main traditional sources for retirement: personal savings, Social Security and pensions. Pensions are going the way of the dodo bird: In the 80s, about 40% of workers had access to a pension. In 2017, only 18% of those employed in the private sector had a pension. And it turns out that Social Security won’t be paying out full benefits in 2034.

Here’s what millennials can do to play catch-up with their retirement savings.

Know Your Number

There are a lot of rules of thumb around what you “should” have saved for retirement, points out Eric Roberge, a certified financial planner and founder of Beyond Your Hammock. “And while those are good guidelines, it’s important not to get too caught up in them – especially if they’re making you feel like you’re behind,” says Roberge.

“A general rule that says ‘you need X saved in your retirement account by age 30’ doesn’t take into account anything else in your financial situation,” Roberge continues. For one, you might have other assets. Maybe you own a business that you’ve invested in instead. Or you’re house hacking and building wealth through several rental properties. “It really all depends on your situation and where you want to go with your life,” says Roberge.

To figure out how much you need to save, understand where you are now, explains Roberge. Then, consider where you want to go in the future. What are your goals, and what kind of lifestyle do you want? “Once you identify those two points, you can start looking at what you need to do now to get you to that place you want to be,” says Roberge. “That might mean saving more cash into retirement accounts, or it could be a different strategy altogether. It’s so important to look at the facts of your situation and not get overly caught up in what the ‘rules,’ say, or what someone else is doing for their own personal financial plan.”

Create a Financial Plan That Includes Retirement Savings

According to its 18th Annual Transamerica Retirement Survey of Workers, the nonprofit Transamerica Center for Retirement Studies (TCRS) finds millennials are facing competing financial priorities that make it difficult for them to save for retirement. For example, 67% cite paying off debt as a financial priority, 43% say they are just getting by to cover basic living expenses, and 38% are supporting children.

It’s easy to let saving for retirement slip. There are so many other priorities that could push it out. Catherine Collinson, CEO and president of TCRS, suggests drumming up a budget that prioritizes saving for retirement in alignment with your other financial goals. “If you’re paying off debt, building emergency savings, saving for a down payment for a home or some other goal, consider the best way to save for retirement while making progress on all fronts,” says Collinson.

Before trying to boost your retirement savings, it’s worth seeing if you need to bump up your cash reserve, explains Douglas A. Boneparth, a certified financial planner and president of Bone Fide Wealth. “The last thing you want to be doing is dipping into your retirement savings should you experience a cash crunch,” says Boneparth.

If you need to increase your savings, don’t tap into your retirement savings. You’ll need to pay a 10% early withdrawal penalty fee, plus any taxes. If you do need a more robust cash reserve, you can employ the same tactics of cutting your expenses, earning more or both.

Use a Retirement Savings Calculator

When it comes to how much money you need to put into your retirement accounts, it’s handy to use a retirement savings calculator. “When doing so, be prepared for an eye-popping number and avoid becoming overwhelmed,” says Collinson. “Once you’ve calculated the estimate, you will be in a better position to adjust your expectations and set forth a roadmap for achieving your retirement savings needs.” Keep in mind that you should update your estimate periodically, as your personal and financial situation will change over time.

Review Your Cash Flow

Roberge recommends taking a serious look at your cash flow to see why you’re having trouble saving. “What are you spending right now that’s preventing you from doing the more important work of building security for your future?” says Roberge. “You don’t have to become insanely frugal, but you should start cutting the fluff from your spending.”

Be a little more mindful of how much you go out or how much you spend on trips or shopping outings. You don’t have to deprive yourself or stop doing this kind of spending altogether, but look at how you can make tweaks and start cutting back. For instance, be on the lookout for ways to save more money every month. Start by cutting unnecessary subscriptions or overpaying for utilities, points out Shannah Compton Game, a certified financial planner and the CEO, chief money strategist and host of Millennial Money Podcast. “Any money you save each month is another chance to increase your retirement savings.”

Boost Your Income

There are only so many expenses you can cut, so at some point, you need to start looking at earning more, says Roberge. “You might need to take on more responsibility at work and then negotiate for a raise,” he says. “Consider different positions or switching jobs if it will likely increase your pay. If you’re entrepreneurial, you might want to seriously look at starting your own business – or at least looking at a side hustle you can do for a few hours a week.”


Contribute the Employer Match in Your 401(k)

The most important thing is to just get started, explains Sophia Bera, a certified financial planner and founder of Gen Y Planning. One of the best ways to play catch up is to contribute up to the employer match in your 401(k), suggests Compton Game. “The matching dollars help supercharge your retirement savings,” says Compton Game. You can contribute up to $19,000 a year if you’re under 50, and the money can be funded with pretax and post-tax (Roth) dollars, points out Boneparth.

Compton Game also recommends what she likes to call the “One Percent Challenge.” How it works: Every quarter, challenge yourself to increase your retirement contributions by at least 1%. Doing so will help you ease into contributing a larger amount of your salary without you feeling a big impact on your paycheck,” says Compton Game. “Ideally, you should keep increasing their retirement account contributions each year until they’re maxing them out,” adds Bera.

Put Money into an IRA

Why not set up a separate Roth individual retirement account (IRA) or traditional IRA to contribute funds above and beyond your 401(k), asks Compton Game. In 2019, you can contribute an extra $6,000 if you’re under 50 to a Roth or traditional IRA. The major difference between the two is how and when you’ll be taxed. With a Roth IRA, the contributions you make aren’t tax deductible now. However, when you start taking money out, your withdrawals are tax-free. With a traditional IRA, on the other hand, you enjoy tax savings the year you make contributions. You won’t owe taxes until you start to take money out.

Some people might take it a step further by taking advantage of what’s called a backdoor Roth IRA contribution, also called a Roth conversion, explains Boneparth. “In doing so, you can take traditional IRA dollars and turn them into Roth IRA dollars,” says Boneparth. “However, if you have any pretax dollars sitting in an existing traditional IRA, those dollars need to be converted first, and you’ll need to pay taxes on those conversion amounts. Otherwise, after-tax [Roth] IRA contributions can be converted to Roth dollars without paying tax.”

Check Your Eligibility for the Saver’s Credit

If you’re a low or moderate income taxpayer, you might be eligible for the Saver’s Credit. It’s an added tax credit on top of the tax-advantaged savings when contributing to a 401(k), 403(b), Simple IRA, SEP IRA or similar plan, explains Collinson.

How much of a tax deduction you can receive depends on two things: your adjusted gross income and your tax filing status. You can claim either 10%, 20% or 50% of the first $2,000 of your retirement contributions. The max credit you can receive is $2,000 – or $4,000 if you’re married and filing jointly.

The earlier you start saving for your retirement, the more time you have for compound interest to do its magic – and the greater the potential for your nest egg to grow larger. What are you waiting for?

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