3 Money-Savvy Retirement Saving Tips for Millennials

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3 Money-Savvy Retirement Saving Tips for Millennials

If you're in your 20s or 30s, retirement probably seems far, far away. Time can fly by, though, and before you know it, you may find yourself wishing you had taken action sooner. By contemplating retirement now, you could take action that will serve your future self and loved ones in a huge way down the road. Funding your retirement decades in advance is a form of delayed gratification. Putting your hard-earned money away instead of using it now might be a hard concept to buy into, and certain questions might sneak into the back of your mind. If you anticipate making far more income later on, can't you just wait to start saving until then? Are you missing out on opportunities by not starting to save now? What if you need the money for school or to buy a home? These are all valid concerns. The good news is that you have more options than you may think.

Tip 1: Start saving with a balanced approach.

We are all unsure about what the future may hold, but this is where a balanced approach can be very useful. Rather than spending all of your available money (zero delayed gratification) or saving as much as humanly possible (100 percent delayed gratification), consider splitting the difference. With a mixed approach, you can spend some of your money now to enjoy the present, but also save some of your money for later so that no matter what may happen, you will have developed savings habits and financial assets that could be of significant value in the years to come.

Tip 2: Don't leave money on the table.

If you can afford to contribute and your employer offers to match contributions to your retirement plan, that offer is essentially money on the table. For many employer-provided retirement plans, employers will often match a certain percentage of your contributions up to a particular, pre-identified total amount. If you choose not to contribute to your retirement plan, you'll basically be abandoning the money your employer has offered to contribute. If your employer offers a matching contribution and you are comfortable with the details of the plan, determine how much you can afford to contribute, then set up an automatic transfer from your paycheck so you can start piling up savings right away.

Tip 3: Consider alternative retirement plans.

When you contribute to a retirement plan, the ultimate goal should be for long-term savings for your retirement. However, when you are just starting your career, money can be tight with only so much to go around. That may discourage you from starting to save because of the 'what if I need the money for school or a house or something else' scenarios. The good news is that the government recognizes many of these concerns and has allowed certain retirement plans to have options where you can withdraw money for qualified school expenses, a first-time home purchase, certain financial emergencies or a qualified loan.

Different retirement plans offer varying advantages, including differences in when you would need to pay taxes. For example, younger people just starting their careers may want to consider a ROTH retirement plan, which generally involve contributions with after-tax money and can be better-suited for those in a lower tax bracket and lower income range. Depending on your overall financial picture, a traditional IRA, the ROTH model, an alternative plan or some combination may be the best fit for your situation. Do your research and see what works best for you.

Bottom Line

Don't let time sneak up on you. If you wait too long to start saving, it can be much harder to fund your retirement or even too late to take advantage of certain opportunities. The amount you start at isn't as important as simply building the habit of saving on a regular basis. The time you spend in retirement could equal or even exceed the amount of time you are working so if you're able to afford it, it's important that you start the practice of saving now. Make things easier on yourself and commit to a few key moves now that can have a huge impact later on.

About the Author: Jennifer Micieli, CFP® is Credit Karma's Financial Expert. She worked as a financial planner for five years before joining Credit Karma in 2014. Jennifer works with the content and product teams to help members learn how to better manage their finances.

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I'm interested in a ROTH; however, it's been hard for me to get started simply because i dont want to get talked into a plan that has me paying a bunch of hidden fees, any suggestions?

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Yeah, here's a suggestion.  Keep throwing out those excuses.  Do NOT stop finding a reason to put off buiding a small savings for something you'll want or need 10, 20, or even 40 years down the road.  Not saving a dime won't cost you a cent in 'hidden fees'.  It also won't do a **** thing for you in the future. You should just stuff your money into a Starbucks register or send as much as humanly possible to verizon before they go bankrupt.  Apple could use some financial assistance, too.  Everyone will win.  You won't have to worry about fees, (unless you send your paychecks to AT&T via Western Union), and whomever the filthy rich recipient of your life savings is will become that much richer.  

You're welcome, no, really, enough with the thank yous...

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If you mean account opening and annual maintenance fees, there are custodians that don't charge those fees (such as ETrade or Ally Bank) and some that don't charge those fees but have minimum balance requirements (such as Bank of America $100, Charles Schwab & Co. $1,000). 

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"If you can afford to contribute"  ... seriously?  If you work and own a smartphone, visit Starbucks, buy anything remotely categorized as 'entertainment' you CAN afford to contribute, and regardless you can't afford NOT to contribute!  I put anywhere from ZERO to 15% into my 401k over a duration of about 12 years.  I was earning 13.9% on that 401k fund.  I cashed it in two months ago to the tune of over 20 grand.  That's not a lot for 12 years, but it's 20 grand I would NOT have right now had I told myself 'I can't afford to contribute' 12 years ago.  I wouldn't have this 20k to drop down on a new house right now.  I'd simply be saying right now, I wish I would have just contributed at least 1 lousy, pathetic percent instead of just saying NOPE, CAN'T AFFORD IT, GOTTA PAY VERIZON $250/MONTH FOR MY STUPID SMARTPHONE INSTEAD. 

Credit Karma Team
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Hi there,

Thanks for sharing. Glad to hear you are dedicated to reaching your retirement goals! Everyone has a unique financial situation that may or may not allow them to contribute at a certain time. 

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