Why adults of their 20s are frightened about retirement

Why are young adults already feeling stressed about achieving financial independence?


When you’re in your 20s, retirement is a lifetime away. So why are young adults already feeling stressed about achieving financial independence?

A survey by Credit Ninja found some very interesting findings, including certain states where retirement worries start as early as 19.

The results.

In the survey of 3,000 people, the main finding that the average American started worrying about retirement at 25. This varies by state, with South Carolinians and South Dakotans starting out at 19 and Arkansans remaining quiet through their early 40s.

The poll’s most unfortunate result was how much the pandemic has affected pension prospects. One in three respondents have had to postpone their retirement plan since the pandemic began, and more than half believe they will have to work part-time in retirement to make ends meet.

Listen to your elders.

An interesting addition to this survey was asking the late Gen Xers and Baby Boomers to provide financial advice to the younger generation.

The advice they gave was perfectly in line with what a financial advisor would encourage young people to do: start a retirement fund at 20, build good credit, create an emergency fund, and educate yourself.

With pensions tending to be a thing of the past and social security at risk, it’s more important than ever for adults early on in their careers to get on their way to success before it’s too late.

What you should do

If you are in your 20s or even 30s, the first thing you should do is start with a basic financial literacy and create real financial plans sooner rather than later. If you want to achieve financial independence without panicking, the time is right. You started thinking about the future early enough for time to be on your side. Retirement goals are achievable with proper planning, so don’t wait to take stock and make sure you are on the right track.

So listen to the advice of the older generations and take these important steps if you haven’t already:

1. Start a retirement fund – and understand how it works.

If you’re employed by a company that offers a 401 (k) program, start your contribution now. If your company also offers a top-up on your contribution, make sure you put enough cash on each paycheck to match that full amount. This is free money and will help you achieve your goals faster.

For 401 (k) programs with games, make sure you understand your vesting schedule. While some companies offer an instant ban – that is, once your contribution is in your account, it’s yours – many will postpone their ban plan for a few years. For example, if you have a five year vesting period, the employer contributions in your 401 (k) won’t actually be yours for five years. You will be awarded a percentage of this contribution each year until you reach this five-year mark. Leaving your job before your pooled contributions are fully vested could result in a financial loss of potentially thousands of dollars.

If you’re not part of a company that offers a 401 (k), don’t worry. There are also options to help you get started with your retirement savings. Check out options like traditional IRAs and Roth IRAs that can be opened independently at many financial institutions.

2. Build a good credit score.

Understanding credit and how it works should be taught in schools, but often it isn’t. Good credit is vital to financial success as it gives you lower loan rates, better terms on mortgages and leases, and gives you the option to borrow money when you need it most.

If you haven’t started building your bankroll yet, a good first step is to open a starter credit card and use it like a debit card. Spend only what you have and pay it off in full every month.

For those looking to improve their credit, set all scheduled payments – rent, car payments, utilities, and so on – to automatic payments so you eliminate the risk of a missed or late payment.

3. Build an emergency fund.

We have all been told to expect the unexpected. But as an adult, the unexpected usually comes at a high price.

With an emergency fund, usually enough to cover three to six months of saved expenses in an easily accessible bank account, you can handle a situation like unemployment or a broken dishwasher without going into credit card debt.

If you don’t already have one, open a savings account and try to save 15% of your income. You will see your savings begin to grow and as you make more money you can keep saving for greater growth at the same rate.

4. Find out more.

Financial literacy is critical to financial success. Look for resources from reputable sources that teach on topics you may not understand. For help, I’ve published articles on books and podcasts that I recommend to everyone.

The lesson:

The only way to alleviate the panic over retirement is to prepare for it. Start early and take it seriously. 40 years from now, you will thank yourself as you live your dream retirement.

And remember, it’s never too late to get help with a financial plan. Find a consultant who can accompany you throughout your career and advise you personally in order to achieve your goals.

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