Early retirement has become one of the major life goals of most millennials. However, as per THE DELOITTE GLOBAL 2022 GEN Z & MILLENNIAL SURVE Y, 47% of millennials live from one paycheck to another and worry about being unable to cover all their monthly expenses, and another 31% aren’t confident about financial freedom after retirement. This indicates the challenges millennials face in retirement planning. However, there are ways to overcome these challenges and build a neat corpus for your life after retirement.
Challenges Faced by Millennials
Millennials face two major challenges nowadays. First is limited or no traditional assets to fall back on, and second, if you are planning to retire early, you have less number of years in hand to save up for your retirement.
Usually, a millennial starts earning at 22 to 25 in India, and if he is planning to retire by 40, he has around 15-18 years. If you are planning for retirement at a later stage of life or according to the usual retirement age, then Retirement Planning can be smoother.
A few other challenges faced by millennials are high-interest educational loans as the cost of higher education in India and abroad has been shooting up, as well as the competition, paying rent for working in a different city away from your home town, as not every city has equal scope, and finally peer pressure. While there are other challenges as well, these are some of the common grounds where millennials will agree.
How can millennials plan for retirement?
Given the challenges, it may seem difficult to save up for retirement and build a significant corpus with which you can retire comfortably. Still, with a little bit of planning and timely execution of the plans, you can achieve your retirement goals.
• Starting early with your retirement planning is the key to success. Read our blog Achieve Your Dreams through Goal-Based Asset Allocation to learn more. If you think the 20s are not for retirement planning, you are mistaken! As per financial experts, one should start planning their retirement from the day they start earning. So, whether you start earning at 22 or 28, start planning for your retirement from your first paycheck.
• Often people think retirement planning means saving up for daily and medical expenses, but retirement doesn’t mean you stop living your life or have no financial goals, right? Jot down financial aspirations you have which you want to pursue after retirement. Though it is tough to pinpoint exactly how your life will be after retirement and your financial goals, you can at least draw a blurred image and save accordingly.
• Automate your savings using SIP: Your Shield in the Face of Market Volatility so that every month when your salary or payments get credited, a portion of the same gets automatically invested into mutual funds. For millennials, investing in equity mutual funds can be a good idea as you have at least 15-20 years till retirement, and equity funds have the potential to generate good returns over the long term.
• Roughly determine how much you will need to save up for retirement. You can use online financial calculators for the same and set up the SIP or invest in other investment options for regular investments.
Savings Tips for Millennials
Given the challenges, saving for retirement requires proper planning and consistency with your investments.
Here are some simple changes in lifestyle that can help you save a lot more than you are saving now.
• Remote working is becoming increasingly famous. If you are working for any organisation out of your hometown, which offers remote working, you can opt for it to save on the rent you pay for dwelling in the new city. This can also decrease your spending on food delivery apps, as millennials mostly live on them.
• Using public transport will not only help you save some extra bucks, but also you can call yourself an environmentalist.
• While opting for higher education, try to get a scholarship or fellowship. This can reduce your educational loan expenses. Also, if the program is on campus, then try to stay in the hostel or rent shared apartments to reduce rental expenses.
Thus, retirement planning is not rocket science. Everyone can do it with a little determination and by consistently taking small steps.
