Millennials are in need of human advisers, not just robo-advisers who offer no guidance. 40% of millennials say they do not have a retirement strategy in place and 57% report that they have not even begun saving yet.
Many millennials do not understand how important it is to have their own retirement savings account. Some companies offer 401(k) plans, some with matching contributions, and some companies require you to be employed for a certain amount of time (i.e. six months) before enrolling in their 401(k) plan. However, millennials do not have to wait nor should they wait to qualify for an employer sponsored 401(k) before saving for retirement.
Opening a Roth IRA just to have it open and start contributing as soon as they land their first job is a great way to start saving habits early. Millennials should get used to putting away a certain amount of their paycheck away every month, with no intention of using that money for decades. A Roth IRA will grow tax-free with the magic of compounded interest - the sooner they save, the more money they will have at retirement.
Even if a millennial changes jobs (which is common for that generation), they should consider transferring their existing 401(k) into either a traditional self directed IRA rollover or their new employer’s 401(k) plan instead of cashing it out. Cashing out a 401(k) early incurs a penalty, not to mention the loss of the compounding effect that could potentially represent tens of thousands in lost savings. It is one of the biggest financial mistakes that people can (unwittingly) make.
TABER Asset Management can provide services for millennial clients who may not have accumulated significant funds yet but who need guidance in creating a financially secure future. If you would like to learn more about what we can do for you, please email us at firstname.lastname@example.org or call us at 515-557-1860.