A new retirement survey by GOBankingRates found that 42% of millennials — ages 18 to 34 — have no retirement savings. Although they're not alone in having to catch up on their retirement fund — 30% of Gen Xers and 28% of baby boomers are also woefully without a retirement nest egg — millennials continue to face a job market only recently seeing growth and record student loan debt.
What's worse is that of the older, 30-something millennials who have started to think ahead to save for retirement, two-thirds (67%) are still behind on saving toward a comfortable retirement living, according to the study.
The circumstances might appear dire, but they don't have to be. Gen Y can dodge a financially troubling retirement by avoiding these three paramount mistakes today.
Working millennial at her desk.
1. Saying "No" to a 3% Raise
As soon are you're eligible to enroll in your company's sponsored retirement program, do it. Whether you're new to the workforce or getting into the swing of your long-term career, stalling to open a 401(k) through your employer can lead to complacency about saving money for retirement. After all, seeing a bigger paycheck now is a convincing way to allow your retirement savings to fall behind.
Robert R. Johnson, president and CEO of The American College of Financial Services, a nonprofit, accredited institution, reveals what millennials are inadvertently saying when they fail to participate in retirement plans offered by their employer.
"Some millennials make the absolute cardinal sin of not participating in an employer-sponsored retirement plan that has a matching element," Johnson said. "For instance, some employer plans require the employee to save 3% of their income in a retirement plan, and the employer will match that 3% contribution. Employees who forgo that opportunity are, in effect, saying 'No, I don’t want that 3% raise.'"
"That literally is free money and rejecting that opportunity is one of the absolute dumbest financial moves an individual can make," he said.
Related: Retirement Planning Checklist for Millennials
Reality Check: Your employer is practically holding your hand and giving you every incentive to save enough to have a decent lifestyle during your retirement years. More than 30 million full-time private sector workers can't even say they have access to this same opportunity, according to a 2016 Pew Charitable Trusts retirement survey.
If your employer didn't provide eligibility details during the onboarding process, reach out to your HR department to ask how and when you can participate.
Learn More: 10 Big 401(k) Questions to Ask Your Employer
2. Being Too Lazy to Open an IRA
Employer-sponsored matched retirement plans are advantageous for building your retirement savings, but they're not your only option. If you don't have access to an employer-sponsored retirement program, get proactive and protect your future with an individual retirement account.
"My company does not have an employer-sponsored retirement plan, so I opened up a Roth IRA for myself," said 25-year-old D.C.-resident Josh Schwaber.
For the past six months, Schwaber has been working at a registered investment advising firm in an entry-level position. Despite an introductory salary, he's taking active measures to stay on pace with his retirement goals by saving $150 per paycheck into his IRA for a minimum $3,600 saved annually.
"Having this money set up to automatically be deducted from my checking account when I get paid allows me to not factor it into my budget and put it 'out of sight, out of mind,'" he said. "At the end of the year, I can then look at how much I have saved up, and if I have extra money saved up, I can contribute up to an additional $1,900 into my IRA," Schwaber said.
"Before I started doing it this way, the biggest issue I had was not being consistent," he said. "I would save $200 one month, then $0 the next. While that is better than not saving at all, it is not a good habit to get into when it comes to saving in general."
Reality Check: With IRAs, there's no reason to rely on your employer to get started with your retirement fund. There are a number of different IRA options, the most popular among millennials being the Roth IRA, which allows investors to withdraw funds at retirement age tax-free. In fact, in an analysis by T. Rowe Price, a 25-year old who remains within the same tax bracket during retirement is projected to have 20% more spendable income through a Roth IRA compared with a traditional IRA.
3. Feeling Like There's Enough Time
Based on age, compound interest and the number of years ahead before retirement, millennials — and even experts — cite time as being the greatest advantage this generation has when it comes to saving for retirement. However, this edge is also a detriment to some millennials' progress.
Ashley Feinstein Gerstley, New York-based money coach and founder of The Fiscal Femme, explains why it's easy for millennials to detach themselves from the idea of retirement planning.
"I think the most difficult part about saving for retirement for millennials is how far off it can feel," said Gerstley. "The end goal can also sound really daunting. How are we ever going to save that much?"
To ease the immediate impact of contributing to a retirement fund, Gerstley recommends starting low and working your way up to a more standard retirement contribution. "You will hardly notice 1% of your pre-tax income coming out of your paycheck," said Gerstley. "In a few weeks, kick it up to 2%, then 3%. Little by little, you are increasing your contributions without the pain."
Reality Check: Yes, you have time, but the biggest truth you'll face is that time is finite. A 2015 IRI and the Center for Generational Kinetics Release New Millennial Research Study found that 56% of millennials don't believe they'll be able to retire when they want to, with 50% of this group expecting to never be able to retire.
The sooner you recognize that financial freedom in retirement starts with the actions you take today, the stronger your chance on not becoming one of these dire statistics.
"Yes, it sounds like a long way off, but if you have the assets, there's no reason why you can't retire sooner," Gerstley said. "Financial freedom doesn't mean you stop working; it just means you can if you want to."
Keep Reading: Haven't Turned 30 Yet? You Can Still Save $1.4 Million Before Retirement
