Article Highlights
- Most Americans are not financially prepared for retirement
- Almost a third of Gen Z'ers aren't saving for retirement at all
- Everyone can save for retirement, even living paycheck to paycheck
- Traditional and Participate 2 Earn investment options can get Gen Z'ers to $1 million over the course of their career
How to Start Saving in Your 20's to Reach $1 Million by Retirement Age
It is no secret that most Americans are woefully unprepared for retirement.
According to a recent Bankrate survey, the median retirement balance is a paltry $27,376. To put this figure into perspective, it is more than 12% below the federal poverty line for a family of four.
The solution, according to America’s best and brightest economic minds, is that Americans simply need to save more.
If only it were that easy.
With today’s costs-of-living outpacing wage growth, most don’t have the extra resources to contribute more to retirement plans – let alone save at all. In fact, according to a recent Bankrate survey, 22% of Americans haven’t contributed to their retirement savings in the past year, and 29% of Gen Z said they aren’t saving for retirement at all.
29% of Gen Z said they aren’t saving for retirement at all
Gen Z’ers need to heed the warnings of their elders who revealed in the same Bankrate survey that not saving early enough for retirement was their biggest financial regret.
Fortunately, today’s Gen Z’ers have two things going for them: time and technology. In fact, starting early is the key. Look at the difference in earnings in the graph below for those saving $100/month at age 22 and those just 10 years later. Those waiting 10 years save less than half as much!
Below are a few ways that Gen Z’ers can ensure they reach $1 million by retirement age – even those who are presently living paycheck-to-paycheck and/or are without a workplace plan.
Roundup Your Purchases:
The very first thing every Gen Z’er should do is download a digital savings app with a roundup feature like Worthy's. This will ensure that a portion of one’s monthly expenses can be converted into savings. This will enable individuals to save without even realizing that they are saving. Worthy’s digital investment app allows those roundups to earn a fixed 7% annually – even during stock market declines. Worthy also offers no-fee liquidity for those who may need to temporarily dip into their savings in order to pay bills.
Diversify, Diversify, Diversify:
Diversification cannot be stressed strongly enough. It is important that as one’s savings accumulates, the monies are dispersed across different asset classes. Bonds, for instance, work well for risk averse investors. However, because Gen Z’ers have the advantage of time, they have the luxury of being more aggressive in their investment approach. Accordingly, to boost returns, Gen Z’ers should be adding growth products such as stocks, venture capital and even cryptocurrencies to their portfolio. Because of fintech innovation, many high growth alternative assets such as private equity and real estate are now available to small investors in micro-increments.
Open up a Self-Directed IRA (SDIRA):
Everyone – even those possessing traditional 401(k)s and other workplace retirement plans - should open up a self-directed IRA. The reason is simple: most workplace retirement plans won’t allow for proper diversification as they usually offer limited and more traditional investment choices. A self-directed IRA gives the individual a mechanism for a properly diversified portfolio to accrue tax-free.
Traditional investment strategies like the ones above will get you part of the way there. But with new innovations in Fintech, you can reach a million dollars by doing little more than what you are likely already doing!
Participate in Activities that Enrich Your Life:
Here’s a little secret that most are unaware of: thanks to digital and blockchain innovation, individuals are now able to be compensated for participating in routine activities via “participate-2-earn apps” that reside in the rapidly unfurling web3 ecosystem. Web3 can enable individuals to sock away hundreds of dollars of supplemental monthly earnings just by pursuing common pastimes such as posting on social media, taking educational courses, watching entertaining videos, listening to podcasts, surfing the web, exercising and more.
Using Participate to Earn apps, here is an example of how to earn over $1 million over a career.
So however you approach investing in your future, just remember the earlier you start the better! Happy investing!
