It can be difficult to imagine ourselves many years in the future. And in a time when the costs of housing, childcare, student loan payments, and even food seem sky-high, much of our financial planning focus falls upon monthly budgeting. But Millennials who skip retirement planning now will likely come to regret it later.
Retirement planning is now even more important than ever, due to these five factors.
Healthcare is more expensive than ever. Imagine retiring at age 65 and then discovering that Medicare actually does not pay for all of your healthcare needs! That’s the reality for retirees, but many younger people aren’t aware of it. In addition to your Medicare premiums, you will be responsible for copayments, deductibles, and uncovered expenses like dental care, vision care, hearing aids, dentures, nursing home stays, and more.
Early retirement plan withdrawals. Many Millennials have made the choice to dip into their retirement plans early, to access funds for a home purchase or to bail themselves out during pandemic-related job losses. Unfortunately, that means years of lost compounding interest. Those who made this choice will need to work extra hard to make up the difference.
High debt loads. The average Millennial is carrying more than $27,000 in debt. Those who carry this debt into retirement will face a higher cost of living due to the payments.
Lost opportunity. If your employer offers matching retirement plan contributions, you should plan to contribute at least the full matching amount each year. Otherwise, you’re simply missing out on free money.
Lifestyle expectations. Many Millennials are accustomed to a more generous lifestyle than past generations. While this certainly isn’t a bad thing, you might find it difficult to adjust to a more restrictive mode of living if you someday retire short of adequate funds.
You can still be taxed in retirement. Many people make the mistake of thinking they won’t be taxed in retirement, but retirees can end up paying considerable income taxes due to retirement plan distributions and investment income. Plus, everyone pays property tax, sales tax, vehicle tax, and so on. Those continue to rise in many areas.
Don’t just assume that retirement will come as easy to you as it did to your Baby Boomer parents. Call us to schedule an appointment, so that you can start planning for retirement now.