PensionCheck Online | FPPA

The Official Blog of the Fire & Police Pension Association

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Earlier this week, you might have noticed #MillennialRetirementPlans trending on Twitter. If you clicked on it, you’d find Twitter users predicting what their personal and financial lives would be like in retirement. And since Twitter is, well, Twitter, the responses were predictably sarcastic and pessimistic:

Is this really how millennials, currently the largest living generation, feel about retirement? Yes it’s true that the selfie generation is dealing with sky high tuition prices, medical costs and housing prices. But, the reality is that millennials, currently between 23 and 38 years old still have a minimum of almost 30 years until they reach what most consider “normal” retirement age. So there’s plenty of time to prepare for retirement, and much that can be done to make sure you’re financially ready for the future.

man holds up phone to take a selfie at sunset
There is still hope for the #Selfie generation

This is the part where I should share that I, the author of this post, am in fact a full-blooded, flag-waving, card-carrying millennial. I’ve considered literally attaching my smart phone to my hip, I regularly conduct entire conversations in emoji, and I refuse to give up avocado toast under any circumstance. That said, I also spend every day writing about retirement planning for the Fire & Police Pension Association. And like our members I pay into—and plan to one day draw from—a government-sponsored pension plan.

With that in mind, I’m here to say to our millennial members that all is not lost. We still have literal decades to plan and execute a financial strategy to someday reach a relaxing, well-earned retirement full of #BestLife selfies and even more avocado toast. We can get there, and here are four things you can be doing right now to get started:

Four actual #MillennialRetirementPlans that you won’t get from Twitter

  1. Pay close attention to your pension
    FPPA members (and others that will collect a pension someday) should learn exactly how your defined benefit plan works. Sure, it’s easy to say ‘well, I have 30 years until I’m going to retire, so learning how my pension works can wait til later.’

    Sorry to say it, but if that’s you, you’re wrong. Taking the time now to learn how your benefit will build over time, and calculating out what your pension checks might eventually look like will give you a much better idea of what you’re working toward. It’ll give you a literal finish line to focus on and put the whole picture into perspective.

    Pro-tip for FPPA members: attend your next department visit from the FPPA field-education team. In 10 minutes, they can run all the calculations necessary to estimate what your future benefit could look like. Or if you’d rather, give us a call to run projections whenever it works for you.

  2. Open an employer-sponsored savings plan, such as a 457 or 401(k) (if available)
    Quick question: do you like free money? Of course you do. Many employers offer some type of a defined contribution plan like a 401(k) or 457 plan. Often in these plans, employers will match your contributions each month, up to a certain percentage or dollar amount.

    So if your employer offers one of these plans with a match, open an account ASAP. Then contribute at least as much as your employer will match (but more if you can). Because…free money.

  3. Get out of debt immediately
    If this was a step-by-step guide, this item would be further up the page, maybe even number one. Why? It’s simple: you’re better equipped to do the rest of the items in this list if you don’t have the weight of credit card, auto, student loan or other debt dragging you down.

    I also know that this step is, for many, much easier said than done. Millennials are currently carrying a staggering amount of debt into adulthood. It’s time to knock it out.

    So how do you get out of debt? There are many methods out there, but two that we like are the Debt Snowball and the Debt Avalanche. Deep dives into each method are already available online, but for now, here are the basics:

    Debt Snowball: list your debts smallest to largest. Then, make the minimum payments on everything but the smallest debt. On the smallest, pay as much as you can afford to spend each month until it is paid off. Then, once that debt is paid, take all the money you were spending on the smallest account and apply it all to the next smallest. Thus, with each debt you pay, you have more money (a.k.a. a larger snowball) to throw at the next one.

    Debt Avalanche: This is very similar to Debt Snowball, but deals with interest rates rather than debt balance. Instead of paying the smallest balance first, the avalanche method calls for paying the debt with the highest interest rate first, regardless of the balance. Then, after the highest-interest debt is paid, you move on the second-highest, and so on until all debts are paid off.

    So, which is better? Honestly, the better method is whichever works for you. Both are great, and the important thing is to just get out of debt as quickly as possible using whatever system works for you.

    And this should go without saying, but going forward, it’s important to avoid any bad debts like the plague. You don’t want to get in another debt mess again, do you? That’s right you don’t. Plus, once you are debt free, you have more funds to use towards…

  4. Maximize your own saving and investing
    This one might be the toughest on the list. It also might not be possible right away, depending on where you are on your financial journey. If that’s you, just toss this in the back of your mind for a minute.

    That said…Not to be too much like your parents or that guy in line at the store who has no sense of boundaries, but … now is the time to take savings and investing seriously. The reason? Having more time to invest between now and retirement means more time to build up that sweet, sweet compound interest. And the only way to maximize compound interest is to give your investments as much time as possible to grow.

    Not sure about the whos, whats and whys of where you should start with saving and investing? Neither am I! Everyone’s situation is different so there simply is no one-size-fits-all strategy for financial fitness. Our best advice: consult a financial advisor.

So there you have it, four things you can be doing right now to improve your #MillennialRetirementPlans. But hey, if those don’t work, there’s always Plan B:

FPPA members, do you have questions about how your FPPA defined benefit or defined contribution accounts fit into your eventual retirement plans? Get in touch!