Millennials have a huge opportunity right now for their retirement savings. They have what many Baby Boomers now want. What is it? Time.
The importance of investing money for retirement during a person’s early adult years cannot be overstated. For better or worse, these early years will have a significant impact on retirement savings.
This is because of compounding. A reporter once asked Albert Einstein what he considered to be the greatest invention of all time. His response? “Compound interest.”
If you need a refresher on how compounding works,
check out this post. To put it simply:
A little bit of money + A lot of time = A lot of money.So how can Millennials miss out on the huge but vanishing opportunity they have before them?
- Don’t habitually save. Contributing a little bit of money every three months into your retirement savings is better than nothing, but it will not get you the results you desire. To take full advantage of your early adult years, put money toward your retirement at least once a month. And take advantage of technology by making it automatic.
- Don’t take advantage of a 401(k) match. If your company offers a 401(k) match, take it. Contribute whatever is necessary to receive the maximum match. Don’t leave money on the table that is yours for the taking.
- Constantly chase risky investments. Those who pursue risky investments often have worse investment performance that those who invest in either a solid mutual or index fund. If you find yourself getting jealous of your friend’s story about how he got a great return on an incredibly risky stock, ask him about his overall portfolio performance. Usually behind every high-risk investment success story are several stories of financial loss.
Millennials, don’t miss this opportunity. Leverage time to your advantage, because soon, it will have vanished.
Written by Art Rainer, member of the Summit Stewardship and Generosity Ministry Leadership Team.Get resources like this one directly into your inbox by signing up for the Stewardship Ministry Digest.The Summit provides free financial coaching to help you gain control of your personal finances according to God’s plan.Sign up here.