
Though they seem to catch a bad rap, Millennials are actually in a very promising phase of life, ranging from their late 20s to early 40s, they are at the peak of their professional journey and earning potential. Many are skillfully balancing budgets as they nurture young families, tackle student loan debts, and take on caregiving responsibilities for aging parents. Amid these daily demands, it's heartening to realize that it's never too early for them to embark on the journey of retirement planning.
Below we have compiled financial "checkpoints" that every Millennial should consider achieving within the next five years, providing a roadmap toward a brighter financial future.
Contribute To Retirement Plans: Embrace the gift of time and the magic of compound interest. Contribute to your retirement plans with confidence. Maximize your contributions and, if your employer offers matching programs, make the most of them. Consider this an act of kindness to your future self, ensuring you'll cherish your retirement years.
Diversify Your Portfolio: Craft a financial plan that harmonizes the essential elements of a secure strategy. First, save diligently for retirement while maintaining a balanced budget. Second, prioritize diversifying your investments. This diversity acts as a protective shield against unpredictable growth and inflation scenarios. Note that a traditional portfolio often lacks this balance, leaving you underprepared for the challenges of inflation and growth.
Devise a Debt Management Plan: It's true that many individuals are grappling with debt levels nearing their highest level ever. Credit card balances often overshadow all other forms of non-mortgage personal debt by a significant margin. For those dedicating around 30% of their monthly income to debt repayment, the prospect of prolonged debt can indeed be daunting. Finding assistance from a Financial Advisor to help create a repayment strategy can bring peace of mind to what can often be a stressful time.
Consider Long-Term Disability Insurance: Often overlooked, long-term disability insurance can provide valuable protection, especially if you have many years left in your career. It might even be more crucial than life insurance. Plus, if you have access to an HSA plan, think about maxing it out and investing any excess beyond your short-term needs.
Prepare for the Possibility of Serious Illness: While we often dream of retirement as a time for travel and luxury, it's crucial to prepare for the unexpected, such as serious illness. Life insurance, especially when you're younger, offers affordable premiums, ensuring you have the necessary protection in place well before retirement.
Lock in Low Life Insurance Premiums: As you age, life insurance premiums increase, and health issues may arise. If you're single without children, consider naming your parents or siblings as beneficiaries to assist with final expenses and any student loans they may have cosigned.
Understand the Tax Implications of a 401(k): Millennials should think about the long-term tax implications of their savings strategy. The conventional wisdom of maxing out your 401(k) assumed lower retirement tax brackets. Given the changing landscape, there may be more tax-efficient ways to save for your future.
Create an Estate Plan: An estate plan is a vital step, especially for Millennials entering higher-earning phases of their careers. It helps avoid probate courts and fees while safeguarding your family and charitable contributions.
Invest in Private Equity: Consider private equity investments for long-term financial planning, taking calculated risks for potentially higher returns.
Draft a Will: Regardless of your current wealth, having a will ensures a smooth transition of your assets to loved ones, avoiding probate complications.
Build Flexibility into Your Retirement Portfolio: Diversify your retirement assets to gain flexibility. Don't put all your retirement eggs in one basket; diversification protects your assets for long-term planning.
Develop Plans for What You’ll Do in Retirement: Plan how you'll spend your time in retirement. Knowing your retirement goals can help you better plan for when you can retire.
Invest in Short- and Long-Term Disability Coverage: Don't cut corners on insurance coverage. Proper short- and long-term disability coverage can safeguard your finances in case of a disability during your career.
Establish an Emergency Savings Fund: Start building an emergency savings fund right away. Ensure it covers at least three to six months of living expenses. This financial safety net will provide stability and keep your retirement savings intact, even in times of unexpected events like job loss or medical emergencies.
Though it may seem challenging to look beyond immediate financial commitments, embracing strategic preparations and wise investments at this stage can yield substantial rewards in the future. These efforts can lead to a secure income stream and a more comfortable lifestyle when they eventually reach retirement age.
If you are ready to take the next step in your financial journey, give our team a call and we can lead in the direction!