If a member of Gen Y starts putting $5,000 into an IRA or RRSP at age 25, and invests for 40 years (until age 65) he or she will end up with $1.8 million (assuming a 8% annual return), according to Aycock Financial Group financial representative J.D. Lewis.
Lewis described the benefits of early saving for Gen Y, and the benefits of working with a financial planner or adviser, on the audio show Keeping Up with Gen Y on Y Gen Out Loud. Show host Tamara Bell asked questions about financial planning, and how Gen Y can get its house in order. And one of the biggest things that Millennials can do is to start saving now.
According to the assertions made by Lewis on the show, waiting until age 35 to start saving can make a big difference. If you put that same $5,000 in for only 30 years means that you only end up with $783,000 -- a difference of $1 million.
Lewis points out that retirement is a big issue, since Gen Y is the first generation that is likely to have the entire responsibility of retirement on their own shoulders. Someone who is in the gray area between Gen X and Gen Y would understand some of these worries.
It seems fairly certain that Social Security or Canada Pension won't be paying the kind of benefits their parents will see. And for Gen Y, there is a chance that Social Security won't even be available at all as supplemental income. Which means that NOW is the time to prepare for retirement.
While seeing a financial professional can certainly help you chart a course, it may not always be necessary. Whether you seek the services of a financial professional, or make your own plan, it is a good idea to educate yourself about money, how money works and the best methods of managing it. Once you understand the basics, you can make a plan that will lead you to financial freedom.
The earlier you start to get on track, the better. No matter your generation.
