Retirement strategies will help millennials prepare for future

By The Illinois Municipal Retirement Fund

OAK BROOK, Ill. — Many millennials, those ages 18-31, face financial challenges from student loans and an unstable job market. To help them regain financial footing and prepare for the future, the Illinois Municipal Retirement Fund (IMRF) encourages millennials — and other generations — to re-examine their saving strategies and retirement plans during National Save for Retirement Week, Oct. 20-26.

IMRF, the state’s second-largest and best-funded public pension plan, encourages all Americans to budget accordingly for retirement, develop long-term savings practices and stay in control of their finances.

Fifty-four percent of millennial Americans consider debt their biggest financial concern, according to a May survey by Wells Fargo. And while more than half of the surveyed millennials (51 percent) say they will save for retirement, many wait until their late 20s to begin contributing to a retirement account. IMRF suggests individuals contribute as soon as they can, rather than wait until they are older.

IMRF Executive Director Louis W. Kosiba said: “Most Americans fear they have not saved enough for retirement. This is why we must take a step back and look at our current saving strategies now — before it’s too late. Today’s young workers cannot afford to wait to think about retirement. At IMRF, we help people save and invest a little each day, so their retirement will be secure in 20, 30 or 40 years. We encourage individuals to take a similar approach to their retirement saving.”

IMRF has identified the following six tips to help individuals save for retirement:

1. Pay off college debt as quickly as possible. The average unpaid college debt in 2010 was $26,682, according to the Pew Research Center. Interest rates for college loans are about 4.5 percent, but can top out at 8.25 percent for undergraduates and 10.5 percent for graduate students. Because interest compounds over time, these debts can grow. Retire them quickly.

2. Boost your credit score. Millennials have the worst average credit score of all age demographics, according to credit bureau Experian. Low credit scores result in high interest rates, making it difficult to take out a loan for potential major future purchases such as a car or house. Improving your credit will lower your borrowing costs for these purchases. The best way to improve a credit score is to pay bills on time. The three national credit reporting companies — Experian, Equifax and TransUnion — will supply a free credit report once a year to those who request it. Check out yours.

3. Pay yourself first. To avoid overspending, create a savings account. After receiving a paycheck, pay yourself first. Save a practical and comfortable amount — even if it seems relatively small. Then, use the remaining money for other expenses. Many financial advisers recommend keeping at least six months of living expenses in a savings account at all times.

4. Know what your employer offers. IMRF administers a defined benefit pension plan for its members who work for local units of government. However, many private-sector employers will match a percentage of their employees’ contribution to a retirement plan, such as 401(k). Yet, some millennials don’t know the amount their employers will match. If your employer matches the first 3 percent of contributions, that instantly doubles the first 3 percent of pay that you contribute. Individuals whose companies do not offer a retirement savings plan should consider opening an Individual Retirement Account (IRA) as another way to save.

5. Use technology to help budget expenses. Many millennials can also use their tech-savvy skills to plan their finances. Websites and mobile applications such as and Quicken track and analyze weekly spending, as well as send personalized reminders to pay bills, or warn when an individual exceeds budget in a certain category. Many services offer a free version that can help individuals set budgets and savings goals — and put the program’s tailored tips to save into practice.

6. Take prudent investment risks. The younger generation can tolerate risks better because they have time to allow their investment to grow. Although S&P 500 stock index funds fluctuate more than bond funds, over time, their 50-year returns are nearly four times greater.

Changing spending habits takes time and commitment,” said Kosiba. “Retirement should be a priority for everyone. Even those who may think they have plenty of time until retirement should begin to contribute to retirement savings as soon as possible.

Retirement is the largest ‘purchase’ of your life,” Kosiba said. “Young people who use these strategies now will be more secure in their retirement later.”

From the Oct. 16-22, 2013, issue

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