Planning ahead and starting early are the best ways for young servicemembers to become a pro at millennial retirement. For most young people joining the military and millennials, retirement can seem like a million years away. The average servicemember joins between the age of 18-24 and doesn’t retire from military service until their 40s.
On top of that, a recent survey found that 70 percent of millennials think they will spend less than $36,000 per year in retirement.
This is a clear indication of unrealistic retirement expectations, considering expenses were more than $46,000 in 2013 for people ages 65 to 74, according to the Bureau of Labor Statistics.
Become a Millennial Retirement Pro Today:
So let’s be real. Contributing to your retirement account can, and should start now for millennials. If saving hasn’t been a priority, now is the time to change that.
Millennials in the military have the opportunity to contribute to their retirement through the Thrift Savings Plan.
Like a 401k for civilians, the TSP is a voluntary program for federal government and military personnel. Currently, those in the military do not receive matching contributions.
Diversification is a key component to any healthy retirement portfolio, so always investigate other ways to save.
Many in the service receive pensions upon retirement if they’ve served for a certain number of years. Most pensions are only available after 20 years of service. The pension covers a percentage of your basic pay if you serve for less than 40 years. The longer you stay, the more you’ll earn. Those who serve for 40 years or more are eligible for 100 percent of their basic pay. If you leave before official military retirement, you can roll over your TSP to a Roth or Traditional IRA.
Saving short and long-term
Forty-seven percent of millennial military members say that saving for retirement is “very important” to them, according to a survey by Navy Federal and ORC International. But short-term concerns outshine their long-term priorities.
A larger percentage of military millennials say paying down debt and building up a savings/emergency fund are more important than saving for retirement, according to the survey.
You can learn to balance both paying off your student loans and contributing to your future. The most important part is to start making saving a habit.
Whether you’re putting away $10 or $100, consistency is key. Set up an automatic direct deposit so a portion of your salary automatically goes into a designated savings account. Every time your pay grade increases, put a higher percentage in your savings accounts.
The ideal contribution rate is 10-15 percent of your salary.
Take advantage of savings plans
If your spouse isn’t in the military, they can set up a 401k through their employer. Opening an IRA is also an option. If you need more guidance about what is available to you, consult a financial planner who can help you set goals that will work for you and your family.
Early retirement is definitely possible for those in the military. Take Doug Nordman, a former Navy engineer who retired at 41.
Now, he writes The Military Guide, a blog that educates servicemembers on retiring young. He was able to retire early using a combination of his pension and savings plan even while his wife was still serving in the Reserves.
The life you envision in retirement is possible for anyone. Just think about tomorrow, today!
Start saving now, project your short-term and long-term goals, and create a savings plan to become a millennial retirement pro!