As an accountant, you know that saving for retirement is essential. That’s especially true for millennials (ages 18-34), who will need to save an estimated $1.8 million or more by retirement to avoid outliving their money. Yet with student debt, current living expenses and wariness of investment markets, millennials may resist paying attention to what feels like a far-off time of life. Here are some ideas for countering their current mindset and helping them see the wisdom in planning ahead.
They’re skeptical about traditional financial tools
Unlike baby boomers, who came of age during periods of economic prosperity and generally rising markets, millennials have been shaped by volatile times, including the housing crisis and ensuing recession. During one three-year period, from 2007-2010, Americans’ wealth overall dropped by 40%. While investment markets have bounced back in recent years and the economy has been slowly recovering, millennials may be less confident about the ability of retirement savings plans to grow their wealth over time.
You can: Show how investments build over time. Despite short-term downturns, over the long term, markets tend to recover and continue to grow. From 1928 through 2015, the S&P 500 averaged 11.41% annual growth, even factoring in the Great Depression. Tell millennials that, thanks to their youth and rising longevity, they are in a unique position to start early and save for a long life ahead — and history indicates that their investments have more than enough time to overcome temporary downturns.
To them, retirement seems unreal
The old career and retirement model — 40 years with one company, followed by a gold watch and a secure pension — means little to a generation that expects to change jobs every three years or less. And with entrepreneurial spirit and boundless energy, millennials may think they’ll never retire.
You can: Focus on their goals. Instead of retirement, encourage millennials to think about specific long-term objectives they’d like to achieve. Many young people are interested in sustainability and social issues. If they envision a time when they can spend less time working at a job and more time volunteering, creating a nonprofit organization or traveling the world, how will they make that happen? Showing them specific strategies to save for lifetime goals may have greater influence than urging them to save for a generalized “retirement” that seems unreal.
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