Millennials—also called Echo Boomers and Generation Y—are the successors of the baby boom. While the actual parameters are uncertain, most folks consider millennials to be any person born from about 1977 to 2000. Contrary to popular belief, the millennial generation is now one of the largest population groups in the entire United States.
As Generation Y grows older, the role of finances becomes increasingly more important. Even though retirement may be decades away, it is important to start thinking about the future now. Long-term investments, savings, and retirement funds are all important aspects of financial security during retirement.
While there are many options available, many millennials are finding success in these three options:
As far as investing goes, the 401k plan has always been a staple. For those of you who don’t know, a 401k plan is merely an investing medium where workers allocate a certain percentage of their paycheck (pre-tax) to a savings account. This method in particular is quite popular among the millennial generation because money is automatically deducted from every paycheck, making the act of saving money a practically unconscious decision.
Because the 401k plan is highly regulated, most millennial take comfort knowing that there are very little surprises lurking on the horizon. Quite simply put, workers merely invest a percentage of each paycheck into a savings account where it grows tax-free without facing any burdensome tax implications. Just make sure you look into a few income tax calculators to keep your records accurate. To sweeten the deal, many employers will even match employee contributions up to a certain point, allowing any accrued savings to grow even more!
Jarod Kintz once said, “A nugget of wisdom is more valuable than a nugget of gold.” However, many wise millennials are finding that gold and other precious metals are quite valuable indeed; especially for long-term investments. If we were to peek at the portfolio of any successful investor, we would likely find traces of gold (pun intended!). The price of gold has increased exponentially in the last century or so, moving from approximately $20 per ounce to a staggering $1,150 per ounce in 2015.
Investing in gold has grown significantly more popular among Generation Y simply because it consistently yields long-term success. Unlike financial institutions, gold is a naturally occurring element on Earth that cannot declare bankruptcy. While the U.S. dollar may not be accepted everywhere, gold can be used—and often is—as currency in most any country around the world. If history has shown us anything, it’s that the value of gold is often on the rise and will likely continue to rise as the years progress, making gold and other precious metals an ideal choice for millennials investing in their retirement.
An IRA, or Individual Retirement Account, is similar to a 401k in that it allows an individual to save money by depositing it into a retirement account where it can grow tax-free. There are three primary types of IRAs—Traditional, Rollover, and Roth—each having distinct advantages and disadvantages.
The Roth IRA is often regarded as the most suitable type of Individual Retirement Account for Generation Y. Since millennials typically have many years between them and retirement, there is significantly more time for contributions to compound and grow. Moreover, millennials often pay far less in taxes due to their younger age. Lastly, a Roth IRA allows for early withdrawals of contributions without imposing a penalty. It is important to note however that any accrued earnings on contributions cannot be withdrawn.