Skip to headerSkip to main contentSkip to footer
Get our Free E-newslettersGet our Free E-newsletters
Kiplinger logoLink to homepage
Get our Free E-newslettersGet our Free E-newsletters
Subscribe to Kiplinger
Subscribe to Kiplinger
Save up to 76%
Subscribe
Subscribe to Kiplinger
  • Store
  • Home
  • Investing
  • Retirement
  • Taxes
  • Personal Finance
  • Your Business
  • Wealth Creation
    • Podcasts
    • Economic Outlooks
    • Tools
    • Kiplinger's Personal Finance Magazine
    • The Kiplinger Letter
    • The Kiplinger Tax Letter
    • Kiplinger's Investing for Income
    • Kiplinger's Retirement Report
    • Store
    • Manage My E-Newsletters
    • My Subscriptions
Skip advert
  • Home
  • retirement
retirement

The Top 10 Retirement Tips You Can Give Your Millennial

If you’re a parent with kids in their 20s or 30s — or any kids at all — you’re probably no stranger to worrying about their future, including their financial future.

by: Jamie Letcher, CRPC
March 13, 2018

Getty Images

Skip advert

If you’re a parent with kids in their 20s or 30s — or any kids at all — you’re probably no stranger to worrying about their future, including their financial future.

As you watch your now-adult children venture out into the real world, though, you may see them focusing almost entirely on their financial needs in the here-and-now — paying the rent, determining just how much health or renters insurance they can afford, etc. While learning how to manage their financial needs now is important, though, they also need guidance about how to secure their future.

There are certain underlying principles you can teach your kids now that, if followed, will help them secure financial independence in another 30 to 40 years. As a financial adviser, I have witnessed firsthand how people who approach their finances as a decades-long discipline will find themselves in great shape as they approach retirement. Conversely, those who bounce through life hoping things will somehow turn out all right might find their twilight years challenging.

The following are my top 10 savings tips you should be teaching your adult kids now.

Written by Jamie Letcher, a Financial Adviser with CUNA Brokerage Services, located at Summit Credit Union in Madison, Wis. Summit Credit Union is a $2.7 billion CU serving 163,000 members.

Skip advert
Skip advert
Skip advert

1 of 10

1. Understand the time value of money. It is the most important asset you have.

Getty Images

Skip advert

I sat my two kids down, ages 17 and 21, and explained if they contribute $5,500 to a Roth IRA every year for 40 years and earn a reasonable 7% return, they will amass a $1.2 million tax-free nest egg. Put it off for a decade (meaning they saved the same amount for 30 years instead), and the total is only $556,000 — those extra 10 years can make a world of difference. Indeed, what your child does in their 20s to plant a seed is crucial to where they will find themselves come age 60.

This is a hypothetical example used for illustrative purposes only and does not represent an investment in any specific product. Investment return and principal value will fluctuate with market conditions so that, upon redemption, the investment, including the principal value, may be more or less than originally invested. Illustration does not account for any fees, charges or taxes.

Skip advert
Skip advert
Skip advert

2 of 10

2. Apply rigor and discipline to saving.

Getty Images

Skip advert

If all your Millennial can save to a retirement account is 3% of their income, they should do it, and bump it up 1% every year thereafter until you reach an IRS-mandated maximum (currently $18,500 per year for 401(k)s for those under 50; however, they’ll want to keep abreast of how this maximum may change over the course of their working years). Incremental steps make a huge difference over the course of 30 to 40 years.

There will be periods when they have to back off on savings, but with rigor and discipline, they can build back to the goal.

Skip advert
Skip advert
Skip advert

3 of 10

3. Build an emergency fund for unforeseen events.

Getty Images

Skip advert

Best practice is to keep six to nine months of living expenses in a savings account. If you don’t have an emergency fund, you could be forced to rely on high-interest-rate credit cards, take out a loan or tap your retirement account when the unexpected strikes.

You never know when you might lose your job, have a health problem, need an expensive car repair or any other unexpected big expense.

Skip advert
Skip advert
Skip advert

4 of 10

4. Spend within your means, not your dreams.

Getty Images

Skip advert

If your kid can resist the fancy cars and McMansions, they’ll be able to fulfill these dreams down the road. Delayed gratification is very important!

Skip advert
Skip advert
Skip advert

5 of 10

5. Recognize life has relentless bouts of healthy friction.

Getty Images

Skip advert

Do we take that vacation this year, or save more for retirement? Everyone needs a healthy balance between living their life today and planning for the future.

Skip advert
Skip advert
Skip advert

6 of 10

6. Protect your family adequately with life and disability insurance.

Getty Images

Skip advert

Term life policies for 20-somethings are incredibly inexpensive. Your kid should consider purchasing a 30-year term policy providing $250,000 to $1 million of death benefit, and if their employer offers disability insurance, they should take it. If the employer offers extra, they should purchase it.

No one is bulletproof, and a term life policy purchased now, when your Millennial is young and healthy, can help support their family’s finances in the event of the unthinkable — especially if they’re considering starting their own family in the next few years.

Skip advert
Skip advert
Skip advert

7 of 10

7. Invest heavily in stocks when you’re young.

Getty Images

Skip advert

When the market is down, it is on sale. They must be patient and remind themselves that every contribution they make is purchasing shares on sale. If you go to your favorite store and everything is 50% off, do you buy? Of course! It’s your favorite store! Your kids should look upon investing the same way.

That said, knowing which stocks to buy in this scenario can take a level of time and sophistication most of us simply don’t have. Your Millennial should take advantage of the target retirement date mutual funds offered by many employer-sponsored retirement plans, which take the guesswork out of what to buy and when.

Skip advert
Skip advert
Skip advert

8 of 10

8. Nurture your career.

Getty Images

Skip advert

The best way to save for the future is to get promotions and raises. When your kid gets a raise or promotion, they should devote some of the increase to a long-term plan.

For instance, if they get a 15% raise via a promotion, they should apply 5% of that raise to an increase in long-term savings — and enjoy the other 10%.

Skip advert
Skip advert
Skip advert

9 of 10

9. When you have a cash flow improvement, approach it with thoughtfulness.

Getty Images

Skip advert

As an example, let’s assume a car loan is paid off, freeing up $250/month of cash flow. Most people do nothing, and it is like a glass of red wine in the financial bloodstream. Your child should think through how some or all of that improved cash flow can be strategically deployed for long-term savings, additional debt reduction or both.

Skip advert
Skip advert
Skip advert

10 of 10

10. Establish a goal for a savings rate and a long-term nest egg.

Getty Images

Skip advert

I suggest young people endeavor to save 15% of their income for long-term retirement. That is the here and now. The long-term goal is for them to save eight to 12 times their pre-retirement income for retirement. Therefore, if at 60 they’re making $50,000 annually, by then, they should have a $400,000-$600,000 nest egg.

Developing healthy savings habits is not the easiest of tasks, but with guidance and support from loved ones, your kids can set themselves up for success. It’s worth taking the time to sit down with them now, just as they’re getting on their feet, to set them on the right path.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Contributors

Jamie Letcher, CRPC

Financial Adviser, CUNA Brokerage Services

Jamie Letcher is a Financial Adviser with CUNA Brokerage Services, located at Summit Credit Union in Madison, Wis. Summit Credit Union is a $3 billion CU serving 176,000 members. Letcher helps members work toward achieving their financial goals and through a process that begins with a "get-to-know-you" meeting and ends with a collaborative plan, complete with action steps.

Skip advert
Skip advert
Skip advert
  • 401(k)s
  • careers
  • family savings
  • Roth IRAs
  • how to save money
  • wealth management
  • retirement planning
  • retirement
Share via EmailShare on FacebookShare on TwitterShare on LinkedIn
Skip advert
Skip advert
Skip advert
Skip advert

Recommended

In What Order Should You Tap Your Retirement Funds?
retirement planning

In What Order Should You Tap Your Retirement Funds?

Should you go with your IRA first or your brokerage account? Pulling money haphazardly can have negative implications. Instead follow this road map fo…
June 28, 2022
An Easy Way to Find How Much You Will Spend in Retirement
retirement planning

An Easy Way to Find How Much You Will Spend in Retirement

One simple math equation can help you determine where to start building your retirement income plan, and whether your money should last.
June 27, 2022
Retirement Comfort: How to Avoid Running Out of Money
retirement planning

Retirement Comfort: How to Avoid Running Out of Money

When it comes to retirement planning, one thing all of us worry about is whether we will have enough money to last. Financial professionals can help y…
June 25, 2022
33 States with No Estate Taxes or Inheritance Taxes
retirement

33 States with No Estate Taxes or Inheritance Taxes

Even with the federal exemption from death taxes raised, retirees should pay more attention to estate taxes and inheritance taxes levied by states.
June 23, 2022

Most Popular

8 Money Tips for Seniors Suffering from Inflation
Inflation

8 Money Tips for Seniors Suffering from Inflation

This year has been an especially tough one for seniors on fixed incomes. To stay on track, try these eight financial survival tips.
June 26, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
An Easy Way to Find How Much You Will Spend in Retirement
retirement planning

An Easy Way to Find How Much You Will Spend in Retirement

One simple math equation can help you determine where to start building your retirement income plan, and whether your money should last.
June 27, 2022
  • Customer Service
  • About Us
  • Advertise With Us (PDF)
  • Privacy Policy
  • Cookie Policy
  • Kiplinger Careers
  • Accessibility
  • Privacy Preferences

Subscribe to Kiplinger's Personal Finance

Be a smarter, better informed investor.
Save up to 76%Subscribe to Kiplinger's Personal Finance
Do Not Sell My Information

Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site www.futureplc.com
© Future US LLC, 10th floor, 1100 13th Street NW, Washington, DC 20005. All rights reserved.

Follow us on InstagramFollow us on FacebookFollow us on TwitterConnect on LinkedInConnect on YouTube