Steps for saving for retirement — the millennial way

Millennials, those born between 1981 and 1996 (ages 26 to 41), have come of age during a tumultuous time in our history: 9/11, the wars in Iraq and Afghanistan, the Great Financial Crisis, and more recently, civil unrest and COVID-19. Unlike the relative calm of the 1980s and 1990s when many baby boomers entered the workforce, the last 20 years have been chaotic.

Millennials have come to realize the future is uncertain.

Financial markets have followed a similar pattern. Stock and bond prices rose with relative ease in the two decades leading up to the turn of the 21st century, providing a glidepath for baby boomers to invest and see their retirement balances grow uninterrupted for almost 20 years. The two decades of the new century have been quite different, with two bear markets that approached or exceeded a 50% drawdown, plus another that almost reached 35%. As in life, millennials learned there are no guarantees in the financial markets either.

Perhaps it is because of these traumatic events that disrupted early career plans, millennials’ views of the workplace (and their future in it) are unlike those of previous generations. Millennials know what they want and are not afraid to ask for it.

They want a life-work balance. They want their work to be meaningful. They want flexible hours. They want cool workspaces. They want to bring their pets to work. They embrace technology and use it to do their job better and more efficiently.

As millennials try to live by their values, they are still faced with student loan payments, housing/rental costs and other general living expenses. As a result, this group has been slow to start saving for retirement, but they still have a chance to reach their goals if they think longterm and take advantage of the retirement options available to them.

Millennials view retirement as a “state of mind.” Rather than a specific dollar figure, millennials look to retirement as place that provides them flexibility in their lives and allows them to seek out the new experiences this generation craves.

To reach this “state of mind,” millennials should consider taking the following steps to reach their goals.

• Set up an emergency savings fund of at least six months of living expenses, so there will be cash on hand if you lose your job. Review expenses and create a monthly budget that includes small savings put aside for a rainy day.

• Maximize retirement account savings. Retirement accounts like 401(k)s and IRAs are a great way to boost your savings. In addition, the favorable tax status and potential company match are two more reasons to make retirement savings a priority.

• Pay down debt, especially high-cost credit card debt. Student loan repayment should also be a priority.

• Extra cash should be used to buy a home and/or look to other conservative investments that can grow over time. Get rich quick schemes should be avoided.

• Think long-term and review retirement plans regularly. Remember that retirement is several decades away so a plan needs to be geared for a longterm investment approach.

The future is uncertain, but a long-term plan of saving cash for emergency needs, reducing debt, and investing in tax-advantaged retirement strategies is a terrific road to take for millennials. This road could lead to a “state of mind” that lends to a flexible lifestyle and a life fulfilled with rich experiences.

Raymond J. McCaffrey, CFA, portfolio manager for Cypress Capital Management, a subsidiary of WSFS Financial Corporation. McCaffrey has more than 30 years of investment experience managing institutional, mutual fund and high net worth accounts. He graduated, cum laude, from Villanova University with a B.S. in economics. He received an M.B.A. with a concentration in finance from Carnegie Mellon University Tepper School of Business.

McCaffrey