On November 6, Alexandria Ocasio-Cortez became the youngest woman ever elected to Congress. The 29-year-old Democrat will represent the 14th Congressional District of New York—which includes parts of Queens and the Bronx—in the U.S. House of Representatives, after previously having worked in the food service industry.
Ms. Ocasio-Cortez’s prior resume demonstrates how she hasn’t been immune to common millennial financial problems: In a recent New York Times article, she said that until her congressional salary kicks in next month, she’s struggling to afford an apartment in Washington, D.C., where the average rent of $2,700 is twice the national average. She also has less than $7,000 saved, having dipped into her savings during the 2018 congressional race.
At first glance, that number might not seem so bad; after all, according to an August survey by MagnifyMoney, the median household savings of her peers is $2,430. Compared to the median American household savings of $11,700, however, Ocasio-Cortez still falls short.
When it comes to saving for retirement in particular, it’s no secret that the millennial generation as a whole could be doing better. As you’ll recall from our previous blog on the topic, two-thirds of working millennials have $0 saved for retirement. (Ugh, the mere thought makes our hearts hurt over here.) But it gets worse: Some financial experts estimate that millennials will have to make pre-tax retirement plan contributions of 15%-22% of their salaries starting in their 20s if they want to ensure a secure retirement. With the tenets of compound interest necessitating that you start saving for retirement as early as possible, this means that the 66.2% of Americans between ages 21 and 32 who have nothing saved are starting off even further behind.
Regardless of where you fall, don’t despair just yet. With retirement still 30 or 40 years away, you do have time to get on track—if you promise yourself to once and for all get serious about planning for retirement with these tips:
Create an attachment to your future self
Saving for retirement feels so daunting because, in addition to other things, you're being asked to put aside your hard-earned money in the here and now for some vaguely defined future version of yourself. It's hard to relate to the idea of "Future You" when you're likely feeling protective of "Present You” (not to mention irritated at the idea of "Future You" relying on the money that "Present You" is earning today).
If you’re feeling at odds, try thinking of your future self as someone akin to a close friend or family member, and aim to show that person the same care and consideration you would a loved one. If you view your future self as a friend—someone who is just as deserving of a happy, fulfilling life as ”Present You” is today—”Future You” will start feeling less and less like a stranger.
Get clear about what you want your future to look like
Have you ever really stopped to think about what you’d like your retirement to look like?
Most people are not immediately drawn to the idea of saving. After all, it involves delaying that desire for instant gratification, and, well, that can be tough. But what's easier is to save with a goal in mind. Yes, a generally comfortable retirement is the goal (which we know isn’t necessarily attainable for everyone), but that concept alone probably isn’t enough to inspire you to save for something that’s 30-40 years out—let alone inspire you to save as much as you possibly can.
So start visualizing now what you want your retirement to look like. Try to form a clear picture of that end destination, and then work backwards to figure out the logistics (as in how much to save, how to invest it, when you're aiming to leave the working world behind, etc.). Creating that picture in your mind lessens the chance that you’ll think about retirement as some abstract life event that's happening to someone else in another lifetime.
Get motivated by small accomplishments
There's no doubt you'll be thrilled once you've finally reached the place where retirement is a viable (and comfortable) option. But what is going to tide you over until then?
Well, it’s all about celebrating the milestones along the way.
For example, say you've been putting off rolling over your 401(k) with a previous employer into the plan you have with your current employer. It may require a couple phone calls and it may be inconvenient, but once it's done, it’s done, and you're going to feel so good because the avoidance is usually much more painful than the action itself. And that feeling of accomplishment? 100% worth it.
Yes, in the grand scheme, that action is tiny. But we mention it because it represents something much larger—the fact that you're taking charge of your finances, that you're being proactive, and that you're better off today than you were yesterday. And those are all YUUUGE in our book.
So where does that leave Ms. Ocasio-Cortez? Well, heeding expert advice that one should have a year’s worth of salary saved for retirement by age 30, she should, within the next year, aim to have about $27,000 put away (that’s based on her 2017 wages of $26,600 according to a financial disclosure she filed earlier this year). With the salary bump she’ll get in the House, Ms. Ocasio-Cortez should be able to get back on track.