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How Young People Can Save For Retirement

29 January 2015 in Investing Insights

The millennial generation has saved a median of $0 for retirement. With the struggling social security program and the lack of pensions today, this does not bode well for the younger generation. Without investing in their own retirement accounts, there will likely be very little financial support once they reach retirement age.

So why is it that so few young people are investing for the future? According to AmericanProgress.org, there are four main reasons.


  1. High Youth Unemployment
  2. Stagnant Wages
  3. Massive Student Debt
  4. Poor-quality Retirement Plans

It is certainly not an easy world for the millennials today. College costs are rising (as seen in the chart below) and quality jobs are not as readily available as they used to be. This is resulting in higher unemployment, lower wages, and large student loan debt for the millennial generation.


Source: http://www.usnews.com/news/articles/2013/10/23/charts-just-how-fast-has-college-tuition-grown

A surprising number of employers are no longer making available retirement savings plans, leaving young workers scrambling to find investment options on their own, which very few are doing based on the $0 median retirement statistic, as shown in the National Institute on Retirement Security report.

In order for compounding interest to have its greatest effect on an investment, many understand that starting early is essential. However, with all of the deterrents currently imposed on the young, investing may not  make the list of top priorities.

Instead, college graduates are first looking to secure a job, pay down their large college loans, and find a place to live.


In order for the younger generation to start investing, they must first discover how to free up some cash for consistent retirement funding. Here are a few ideas for them to do just that.

1) Live like a college student after graduation

Even if you find a good job after college, that’s no reason to buy a new car or splurge on a fancy apartment or designer clothes. Not only should you begin paying down your student loans, it would also be wise to sock money away toward your distant retirement. Cars and other material items tend to depreciate in value and, while past performance is no guarantee of future results, over the long haul, the S&P 500 has historically surpassed inflation. If you care about living well in retirement, then starting a retirement account now should be a top priority.

Instead of living large after graduation, find a cheap rental, keep your ugly car, and use your new-found income to fund your first retirement account.  Motif Investing can provide  low-cost solutions for millennials to start investing for their future.

2) Cut back on your entertainment

The entertainment bill each month might seem minor at first glance, but for many reducing this expense can make a massive difference. Just by cutting the cable and calling the phone company to get the cell phone bill reduced (or by switching to a new carrier), one can easily save extra money. As an example, if you were able to take that $150 and put it into an investment that yields 8% each year over 40 years, this could translate into a $500,000 in retirement savings.

3) Increase your income and create multiple income streams

Consider picking up a second job or side-business if your employer allows you to moonlight on the side. Being a top performer at work also puts you in better position for that raise or promotion. If you find yourself stuck, then consider looking for a new job opportunity.

So how do you go about increasing your salary?

      • Take on additional responsibilities and prove your worth
      • Lead project teams to show your leadership abilities
      • Earn a work-related certification
      • Go back to school for a higher-level degree
      • Network with those in your field and always keep an ear open for new opportunities
      • If you work globally, learn a new language

To help increase your salary, you simply need to increase your worth. Find out what is most important to your company and pursue that avenue. The pay increase likely won’t be immediate, but by improving yourself you will certainly improve your chances.

4) Take Advantage Of Company Benefits

Some companies offer excellent investment benefits for their employees. First of all, there could be a contribution match in your 401k up to a certain percentage of your income or absolute dollar amount. By investing up to the match, you can double the amount of money contributed to the plan. You’ll also be able to grow your investments tax deferred.

Secondly, some companies allow their employees to buy their stock at a discounted price. If you are confident in the performance of the company, then this might be an excellent investment opportunity as well. Keep in mind the importance of diversifying your investments, as you don’t want to be heavily investing in one company stock purchase plan investment if things turn really sour.


When Social Security was first instituted, it was meant to provide a third retirement income leg in addition to one’s pension and personal investments. Social Security was never meant to fully fund one’s retirement. This third retirement leg is disintegrating as social security is not funded to adequately support  an ever-aging population. It remains a political obstacle to make the hard decision of raising the Social Security retirement age or cutting payout in an effort to try to adequately fund the program.

No matter what your age, you do not want to depend on Social Security funds to provide significant income to your retirement plan. Even if you’re lucky enough to have a pension, pensions have similar funding issues as well. Take matters into your own hands by investing for yourself. Nobody cares more about your money or your financial future than you.

Whether you’re looking for an investment solution to help save for a house or looking to retire, our Horizon Motifs are designed to provide you with a low-cost diversified solution tailored for your time horizon and risk tolerance. You can trade any of the nine professionally-built Horizon motifs commission-free or customize them to your needs and pay just $9.95 total commission.

Motif Investing also offers no fee Traditional IRA, Roth IRA and Rollover IRA retirement accounts. Get started today.

Photo Credit: Flickr Creative Commons


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  1. Jacob
    4 Feb at 5:58 pm

    I’m pretty worried about the “YOLO Generation”. Seems like there is this “live life now, forget about the future” mentality that will end up screwing a lot of people and tanking the economy 40 years from now!

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  3. Gary Weigh & Associates Pty Ltd
    25 Jun at 4:25 am

    Genuine information! I really like reading the paragraph on start investing today. It is just awesome and quite useful for all youngsters to save their retirement.