For many older millennials\u2014now in their 40s\u2014it\u2019s time to play catch-up.<\/p>\n
According to a report by Transamerica Center for Retirement Studies<\/a>, the median retirement savings for this group sits at $73,000. That’s $427,000 less than the $500,000 target most 40-somethings believe they’ll need and nowhere near the $1.6 million experts actually recommend.\u00a0<\/p>\n \u201cUnfortunately, I see this shortfall often with my millennial clients. They came of age during the Great Recession and are now dealing with rising housing costs, inflation, and higher interest rates during some of their prime saving years. The focus is to make it through the month, not maximize retirement contributions,\u201d says Elias Friedman, founder and senior wealth adviser at Kadima Wealth<\/a> in Schaumburg, IL<\/a>.\u00a0<\/p>\n<\/p>\n If you\u2019re one of the 40-somethings with this wide gap, the clock is ticking. The good news is it\u2019s still possible to meet your retirement goals.\u00a0<\/p>\n All it takes is some dedication, persistence, and creativity.\u00a0<\/p>\n The role of housing costs<\/p>\n Each generation has to work through a complex set of circumstances. For some, it was financial hardship, war, or disease.<\/p>\n For millennials in their 40s, it’s the cost of housing.<\/p>\n \u201cHousing used to be the thing that built middle-class wealth. However, when mortgages and property taxes rise faster than stagnant wages, things get tough,\u201d says Jeromee Johnson, president and CTO of Tellus<\/a> in Kansas City, KS<\/a>.<\/p>\n The cost to maintain a home keeps increasing, too.\u00a0<\/p>\n \u201cThe price of hot water tanks and kitchen remodels, for example, have soared. Even homeowners insurance continues to climb, roughly double the rate of inflation, especially in disaster-prone areas,\u201d explains Steven Rog\u00e9, chief investment officer and CEO of R.W. Rog\u00e9 & Company<\/a> in Beverly, MA<\/a>.<\/p>\n Johnson notes that retirement contributions\u2014unlike mortgage payments and other expenses\u2014don\u2019t have a due date or late fee, so the urgency to make them isn\u2019t always there.\u00a0<\/p>\n \u201cNobody repossesses a 401(k) for skipping a year, so it feels rational to skip it,\u201d Johnson explains.<\/p>\n Paul Carlson, CPA and managing partner at Law Firm Velocity<\/a> in Chandler, AZ<\/a>, points out that older millennials are carrying really high housing costs at a stage in their lives when they should be able to switch gears and start putting more of their income into retirement savings.\u00a0<\/p>\n Boomers, at the same age (mid to late 40s), had decades to build equity and pay down their mortgages.\u00a0<\/p>\n \u201cI don\u2019t mean housing was super cheap back then, but boomers did have more disposable income available for retirement planning. They also had time on their side, since a lot of them entered the market earlier in their adult life,\u201d Carlson explains.<\/p>\n How to close the gap<\/p>\n The first step to closing the gap is realizing you have it.<\/p>\n \u201cA $427,000 retirement shortfall can be overwhelming for many people, but the bigger concern is that many people don’t realize how far behind they are until their 40s,\u201d explains Friedman.<\/p>\n The sooner you understand you\u2019re behind, the more options you\u2019ll have. Here are a few strategies to get you back on track:<\/p>\n Reduce your largest expenses<\/p>\n The gap is too large to cover by simply canceling your gym membership or forgoing that $15 avocado toast.\u00a0<\/p>\n You could (and definitely should) eliminate anything unnecessary, but that\u2019s not what\u2019s going to move the needle quickly.\u00a0<\/p>\n \u201cLook at your biggest assets and expenses. Ask yourself whether they\u2019re hurting or helping your retirement. If they\u2019re derailing it, figure out how you can lower them,\u201d says Carlson.<\/p>\n Consider downsizing<\/p>\n Downsizing isn\u2019t right for everyone, but for many older millennials, it can be the key to closing the gap.<\/p>\n \u201cIf you’re living in a four-bedroom family home but your kids are moving out in 10 years, now is a good time to start thinking about downsizing and how much it could put back in your pocket each month,\u201d Carlson explains.<\/p>\n Make frugal choices<\/p>\n Take a page from our great-grandparents by living frugally.<\/p>\n \u201cVacations go from overseas travel to road trips to local vacation spots. Education goes from the Ivy League to the best state school,\u201d says Rog\u00e9.<\/p>\n It\u2019s not the time to keep up with the Joneses, who may not be retiring anytime soon anyway.\u00a0<\/p>\n Treat your home as a financial engine<\/p>\n If you do decide to stay put, let your home work for you.<\/p>\n \u201cI suggest refinancing or recasting when interest rates drop, eliminating private mortgage insurance after reaching 20% equity, and using the additional cash flow to make overdue contributions to retirement plans,\u201d says Cody Schuiteboer, CEO of Best Interest Financial<\/a> in Detroit<\/a>.\u00a0<\/p>\n Also, a home equity loan or HELOC to pay down high-interest debt and contribute more to retirement is acceptable.\u00a0<\/p>\n \u201cTapping into home equity to fund your lifestyle, however, is not,\u201d adds Schuiteboer.<\/p>\n","protected":false},"excerpt":{"rendered":"For many older millennials\u2014now in their 40s\u2014it\u2019s time to play catch-up. According to a report by Transamerica Center…\n","protected":false},"author":2,"featured_media":728859,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,12171,131,132,1705,1062],"class_list":["post-728858","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-ca","tag-canada","tag-finance","tag-millennials","tag-personal-finance","tag-personalfinance","tag-retirement","tag-video"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/728858","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=728858"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/728858\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/728859"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=728858"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=728858"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=728858"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}