Should I be contributing to my employer sponsored retirement plan?
If you’re like many Millennials, you have student debt and a job that is barely covering your rent and monthly bill commitments. You may be thinking to yourself, “I’ll contribute once I get my bills under control” or “I still have time.” This mentality is dangerous and can hurt your future self. Millennials have the most to gain from starting their 401(k) or other employer sponsored plan right away.
Why should I contribute now as a Millennial?
The beauty of compound interest is on your side when you enter the work force. We may not all be able to contribute 10-15% of our paychecks right away, but using the advantage of time and budgeting will be to your benefit upon retirement. Think about this; if you retire at age 70 and live to age 90 and plan on living on just $2,000 a month, how much money do you think you need to save now to prepare for that 20 years? The answer is $480,000! That is a big number! This is why you start NOW!
How much should I contribute?
I know the biggest question when it comes to contributing to your employer sponsored retirement plan is, “But, how much do I put away?” The best answer that even the savvy professionals will give you is: it depends. We’re so smart! But, it really does depend how long you plan to continue working, how much you can actually afford to put away, and your life expectancy and potential long term care needs.
There are a few things we can all agree upon though. If your employer matches 401(k) funds, contribute enough to get the entire match. Do not pass go, do not collect $200 - sign up when you’re eligible and let that percentage or number be your absolute minimum. This is free (YES FREE!) money and you should take it.
The moral of the story is
- Take advantage of your employer sponsored retirement plan’s match (if your company doesn’t offer a 401k- stop in your local ABNB to start an Individual Retirement Account- IRA -Savings account)
- Live within your means- not over them
- Set a monthly budget and stick to it
- Contribute as soon as you’re eligible until the day you quit working
ABNB Federal Credit Union
Investment Services Sales Assistant