I’m a Millennial: My Biggest Fear About Retirement (And Some Expert Solutions)

Not all millennials have retirement imminently in their sights, but the oldest of them in their 40s are certainly thinking about it already, especially those with families.

Morgen P., age 43, who works in software engineering in California, is the sole earner for her six-person family. She supports her wife and four children in a pricey California suburb, where despite a high income, they live paycheck to paycheck.

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Though she contributes to her company 401(k) and receives an employer match, she’s far from sure it will be enough for herself and her wife to retire on. Add to that the perils of working in an industry where people tend to “age out” at 60 and beyond, she is very concerned that she and her wife could face significant struggles supporting themselves in their golden years.

Additionally, though they own a home, Morgen worries that they could lose it one day by no longer being able to afford the mortgage.

GOBankingRates asked personal finance experts Stephen Kates, CFP and principal analyst with Annuity.org , and Ben McLaughlin, president of Raisin , to offer some possible solutions for Morgen and others in similar situations.

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Acknowledge Times Are Tough

McLaughlin pointed out that these are undeniably tough times and Morgen’s family is “far from alone.”

He added, “Even though the economy is healthy, as indicated by the lowering Federal Reserve interest rate and job numbers, we have been experiencing a cost-of-living crisis. Prices for many consumer goods haven’t returned to pre-pandemic levels, while wages have remained stagnant. Despite what economists say, many families are still struggling, feeling like their dollars don’t stretch as far as they need to.”

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Address Spending

“For people who have high incomes, if you’re living paycheck to paycheck, your first problem is a spending problem,” Kates said.

While income could grow in the future, addressing spending is going to your most urgent necessity. Solving that can be tricky because there’s “no silver bullet,” you just have to make hard decisions, he said.

Make Trade-Offs

Hard decisions could include trade-offs such as, “Downsizing, having fewer cars, moving, changing locations, or changing careers,” Kates said.

Though it may sound counterintuitive, he explained that sometimes taking a job that pays less to live in a place that is cheaper can be effective. “Maybe you make 20% less, but your lifestyle is now 50% less [expensive]. That is the difference between paycheck to paycheck and living an actual lifestyle that you can save,” he said.

He acknowledged that those are not easy decisions, but sometimes necessary.

“Again, we’re generalizing considerable amounts, but if you are living paycheck to paycheck and you physically cannot put any dollars aside, you have a lifestyle spending problem and there’s no way around that unless you can somehow generate more income generally, so you probably have to trim a bit.”

Reconsider Daycare Costs

Another high cost that can free up cash toward retirement is daycare, which Kates described as “punishingly expensive” in some states, especially California. Shop around to see if you can find better deals for your child care without sacrificing quality, or consider schedule changes.

On the bright side, sometimes you just have to get through the difficult years until your kids are in public school to free up thousands of dollars every month that you could put toward retirement savings.

Change Your Approach to Saving

Freeing up cash for retirement sometimes means reconsidering your saving opportunities not just now, but over your lifetime.

Kates, said, “There are going to be moments when you have to pull back, but there are other times when you have to jump in feet first and really pile money up in your savings when you have the opportunity. That can take a lot of discipline when you might otherwise be like, wow, we’re flush with cash. Let’s get a new car. Let’s go on vacation. You have to think about balance.”

Utilize a Flexible Spending Account for Healthcare

Another option to make life a little easier for families like Morgen’s, said McLaughlin, is to look into a flexible spending account (FSA). “An FSA allows you to set aside pretax dollars into an account you can use for medical expenses like doctor’s visit copays, prescriptions, and sometimes even treatments like massage and acupuncture.”

Take Budgeting Seriously

It’s also important to have a well-organized budget. McLaughlin said, “Taking a closer look at where you’re spending the most money and being as deliberate as possible can help stretch your dollars.”

Part of budgeting can include looking to change your spending habits. “As kids are constantly growing and needing new clothes, availing [yourself of] local buy-nothing groups or clothing resale groups is a great way to get barely used clothes for a fraction of the cost. Meal planning is another area where being deliberate can stretch your dollars. Shopping for fruits and vegetables that are in season (if possible) can also help cut costs.”

Take Advantage of Compound Interest

If it’s at all possible to start saving now, compound interest will be your future friend. McLaughlin recommended, even if money is tight, making it a practice to put 10 or 20 dollars a week into a high-interest savings account.

“By the time you are ready to retire, that money will have multiplied considerably. For example, putting $400 into a high-yield account and contributing $75 a month, at 5% interest compounded monthly over 15 years, will turn into $20,892.”

Seek Support

While not everyone can afford a financial advisor, McLaughlin suggested looking for free or low-cost resources available within local communities. “For instance, some public library branches offer free courses and coaching sessions with personal finance experts,” he said.

This article originally appeared on GOBankingRates.com : I’m a Millennial: My Biggest Fear About Retirement (And Some Expert Solutions)