Home / Business / Why millennials must stop pursuing the dream of early retirement – The Motley Fool

Why millennials must stop pursuing the dream of early retirement – The Motley Fool

Almost everyone dreams of a premature retirement. As you get older and get closer to retirement age, it's hard to wake up naturally every morning without an alarm and spend your days the way you want them to. According to a 2017 Gallup poll, nearly three-quarters (74%) of Americans expect to work beyond retirement age, and the average non-retired American also says he will retire at the age of 66.

  Couple sitting on the beach looking out at the sunset

Do you see yourself here at 56? Start planning now! Source: Getty Images

Then there are the millennials. These younger workers have a much more optimistic attitude to retirement, and many of them hope to retire much earlier than their parents. According to a survey commissioned by Provision Living, the average millennium worker dreams of retiring at the age of 56. (By comparison, the average retirement age for baby boomers was 64 years.)

Striving for an ambitious retirement age is not a bad thing. It's fantastic to have goals, and when you're ready to work harder, you can play harder in retirement. However, if you want to retire early, you need to make sure your finances are on the same page as your hopes and dreams.

When dreams and budgets are not reconciled

The main problem with planning Early retirement means you have to recharge your savings over the last few decades. And while many millennials want to retire in the mid-1

950s, nearly half (43%) have $ 5,000 or less in a pension fund, according to the Provision Living survey. That will not go very far.

Of course Millennials are young. The members of the Millennium Cohort are between 23 and 38 years old in 2019. So you have decades before retirement within reach. But the higher your retirement goal, the sooner and more aggressively you have to save.

Let's say you want to save a million dollars until your 55th birthday. (Depending on your age, you may need more or less a variety of factors, but for the sake of simplicity we want to set your target at $ 1 million.) If you started saving at the age of 20 and you have an annual return of 7% on your investment For 35 years, you need to save around $ 600 a month to achieve this goal. If you're on track with this savings plan, you'll need to save around $ 43,000 by the age of 25.

Is that realistic for most people? Probably not. But should you give up on your ideal retirement? Of course not! It's easy to dream big – it's just not easy to take the necessary steps to achieve those goals. The key is to set manageable goals and then create a savings plan that you can stick to.

A retirement dream that you can achieve (realistically)

When your savings come a little short (or too much) The hope of ending the rat race earlier is not lost. You may not be able to retire as early as you like, but that does not mean that you can not retire at all – but you need to adjust your time horizon.

The first step is figuring out how much you need to have saved for retirement. The longer you wait to retire from work, the less you need to save each month – so adjust your retirement age to your budget and decide how much you can put aside to some extent every month.

An Easy Way To use an online retirement calculator, you get an online spreadsheet. There are scores out there, and each one is a bit different, so putting your numbers in a few different calculators is a good idea to get a bunch of answers.

At this point you should consider retiring all other sources of income. These can include social benefits, a pension or pensions. To get an idea of ​​how much you get for social security benefits, try this calculator. Remember, this is just an estimate, but it can at least prevent you from planning based on a wild guess. Remember, too, that you can receive benefits at the age of 62 (and if you claim that this is the case at an early stage, your monthly benefits will be cut). If you hope to retire beforehand, you will not have any social security income that you can rely on before you are eligible.

So, suppose you put your numbers into a pension calculator and find that you need $ 700,000 to be saved to retirement. If you're 35 and want to retire at 60, you'll need to save about $ 900 a month, provided you get an annual return of 7% on your investment. However, if you retire until your 67th birthday, you can achieve your $ 700,000 goal by saving just over $ 500 a month.

Also, remember that your goal of how much you need to save for retirement may change depending on the time you retire. If you spend more years in retirement, you need more money. However, if you postpone retirement by a few years, you probably will not have to save so much. If you delay retirement by a few years, you will have to save less every month, and you will have a smaller, more attainable goal.

The retirement plan is not easy, but it is absolutely necessary if you want to realize your age dreams in early retirement. There is nothing wrong with hoping to retire before most people, but you need to develop a realistic financial plan and a good habit of saving.

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