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To Save More for Retirement, Follow These Millennials’ Lead

Oct. 10, 2017
Investing, Retirement Planning
To Save More for Retirement, Follow These Millennials' Lead
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In the race to save for retirement, one group is doing surprisingly well: millennial parents.

That’s according to a new NerdWallet survey conducted by Harris Poll, which found that 38% of millennial parents (ages 18-34) save more than 15% of their income for retirement. All told, millennial parents reported a median retirement savings rate of 10% of income, compared with 8% for Generation X parents (ages 35-54) and just 5% for baby boomer parents (ages 55+).

Given the picture typically painted of this age group, you might be shouting “fake news” right now. And there’s one caveat: The results include only those currently saving for retirement; some in all age groups aren’t. But according to the survey, that cohort is surprisingly small among younger adults: Only 7% of millennial parents — and 15% of millennials overall — say they’re not saving for retirement at all.

How are the savers pulling it off, especially given the high cost of raising children? Their strategies might help you, too.

They’re making sacrifices

Money doesn’t save itself, and putting some aside often means giving things up, especially if you have limited resources. According to the NerdWallet data, 76% of millennial parents have sacrificed something in order to do so.

Forty-three percent say they’ve cut back on dining out in order to save for retirement. Lest you think they’re just skirting the embarrassing combination of children and restaurants, it’s worth noting that 41% of millennials — both parents and nonparents — have done the same.

That goes for vacations, too. It takes only one trip with young kids to realize you’re doing most of what you do at home while paying more for the privilege. But of those saving for retirement, millennial parents and millennials overall are skipping trips in roughly equal numbers: 42% and 37%, respectively.

They’re saving more when they can

Some life events allow you to save more money — and some force you to save less. If you take advantage of the former, the latter won’t completely derail your savings progress.

Millennial parents follow that strategy, many reporting that they’ve increased their savings rates after major life changes. More than half say they’ve done so after landing a higher-paying job, 39% after getting married and 24% after their children entered school.

These milestones present the rare painless chance to save more for retirement. A higher paying job doesn’t have to come with a higher standard of living; instead, stash at least some of your new income. A kid entering school can mean saying goodbye to day care or preschool costs, often hundreds of dollars per month or more.

Other common opportunities to save more money might come after you’ve gotten a bonus or windfall, paid off a debt or cut monthly expenses such as your cable bill or insurance premium.

They’re making retirement a priority

This is no easy task when you’re in your early 30s or younger and retirement is typically at least three decades away. Today’s needs and wants might tempt you to tell your 65-year-old self she’s on her own.

In fact, that’s the typical party line: Millennials don’t save for retirement because they can’t deal with the delayed gratification. They want what they want when they want it, which is usually a $5 coffee right now. But millennial parents, at least, have the long game in mind, with 61% calling retirement one of their top long-term savings priorities.

Putting saving for retirement at the top of your list might not be hard; keeping it there is the more common issue. If that’s your struggle, treat saving the same way you treat your electric bill: as a nondiscretionary monthly expense.

To do that, it helps to have a concrete goal. Use a retirement calculator to estimate how much you need to save each month. You might not hit that number right away, but you can work your way up to it.

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This article was written by NerdWallet and was originally published by Forbes

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