How Can American Millennials Save for a Comfortable Retirement?
It is said that the average millennial needs to set aside $1 million to enjoy a comfortable retirement. It can be difficult to calculate how much you should save each month in order to reach this sum, however. In this article, we look at the math, and some strategies for reaching retirement savings goals.
How retirement savings are invested can make all the difference.
According to financial analysts from Blacktower Financial Management Group, a millennial needs to set aside an average of $386,100 in order to retire at 67; this amount breaks down to a post-retirement annual income of $35,100. This represents just under 75% of the median American income, which currently stands at $48,700, according to statistics from the Bureau of Labor. Depending on how you invest that $386,100, this sum could last up to 50 years.
To reach this savings total, today’s youngest millennials in their mid-20s would need to have already set $8,775 aside, while the oldest millennials approaching age 40 would need to have saved about $140,000. These calculations assume an average return of around 6%, factoring in long-term inflation and the effects of compound interest.
There are several effective strategies for boosting retirement savings.
With pensions becoming rarer every year, it is vital for millennials (and people of all ages) to start setting money aside for retirement as soon as possible. When employers offer a matched retirement savings plan — for example, a 401(k) with a matching employer contribution — there’s no reason not to enroll immediately. The employer matching contribution is essentially free money.
For millennials trying to save more for retirement, it’s vital to look at income and expenses. Many savers find it useful to create a monthly budget.
Millennials who are starting their careers or working their way up the corporate ladder may be tempted to start spending more when they land their first well-paying job or receive a significant salary boost. While your expenses will certainly increase as you get older, it’s still wise to save at least part of your raise. This is an easy way to increase your retirement savings without feeling pinched.
Malta Pension Plans
The US-Malta Tax Treaty confers substantial benefits to retirement savers investing in Malta Pension Plans. This retirement savings vehicle is effectively treated by the IRS as a foreign grantor trust, reducing the saver’s tax liabilities.
A Malta Pension Plan effectively serves as a supercharged Roth IRA. Whereas Roth IRAs have annual contribution limits of $6,000, or $7,000 for those over 50, Malta Pension Plans feature none of these limitations. In addition, contributions to a Malta Pension Plan may be made in the form of non-cash assets, such as business interests, foreign investments, securities, or real estate. Distributions are also tax-free, and up to 30% of the pension assets can be withdrawn in a lump-sum payment when the pension holder reaches age 50.
Malta Pension Plans are becoming an increasingly popular way of boosting retirement savings because they provide significant financial incentives for retirement savers of all ages.
