Three Retirement Myths Millennials Must Avoid

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When I was early in my teaching career (before I understood how to handle money), I was working with a retired teacher. He was subbing for a teacher who left for another job. One day, he was explaining about his retirement and where his money comes from in retirement.

He receives pension money from the teacher retirement system (TRS) and he also receives a check from social security. He explained to me that he worked at a hardware store after retiring from teaching to build up his social security points enough that he could receive a social security check each month.

This was one of the first times that I took an interest in looking at retirement and I began to research the social security program (I tried to figure out how many points I had accumulated). He then told me, "It's too early for you to start worrying about that. You are too young to start worrying about retirement!"

Retirement Myth #1: You are Too Young to Start Thinking About Retirement

You are never too young to start thinking about retirement. If you haven't already, start thinking about retirement today. This means that you need to start saving ASAP and start investing into retirement accounts (find out more info on the accounts below).

Related: Investing Tools: The IRA and Roth IRA or Investing Tools: The 401k and 403b

Luckily, I didn't take the retired teachers advice about retirement, because I started a 403b (similar to a 401k) my first year of teaching (age 24) and have put money into my 403b all seven years of my teaching career.

Don't let anyone tell you that it is too early to start thinking about retirement. The more you save at a younger age, then the more you will have in retirement.

Retirement Myth #2: Retirement is based on your Age

The term retirement has changed for millennials. It is not an age, but instead it is a financial number. Age 60 or 65 is the retirement age of our parents. We millennials can retire earlier if we want. We can start saving earlier and use retirement calculators to help us figure out our financial retirement number (You can use the Retirement calculator at Personal Capital if you sign-up for a free account).

We millennials can retire earlier, because we are taking advantage of compound interest. Millennials are beginning to save for retirement earlier than baby boomers and people in generation X (as shown in the graph below).

  Image Source: Screenshot from https://www.chase.com/news/101716-millennials-money

Image Source: Screenshot from https://www.chase.com/news/101716-millennials-money

According to the graph above, millennials on average are starting to save for retirement at age 23 (I started at 24). That's 17 years earlier that baby boomers and 7 years earlier than Generation X. That's seven years or 84 months of earning extra compound interest. 

To show you the power of compound interest, let's look at a scenario that was first presented in a article found on DaveRamsey.com. In the scenario, two friends (Ben and Arthur) save $2,000 a year. Ben invests from age 19 until age 26 ($16,000 invested total) and Arthur waits to start investing until age 27 and invests until age 65 ($78,000 invested total). 

In both scenarios, a 12% compounded growth rate is assumed. The results of this scenario are shown in the table below.

  Image Source: Screenshot from  DaveRamsey.com

Image Source: Screenshot from DaveRamsey.com

As you can see, Ben invested less, but had more at age 65. This is because he took advantage of compound interest.

Ben took advantage of an eight year head start. Now only imagine the possibilities of Ben's investments if he would have kept investing. He would have become a millionaire earlier. He would have been able to retire "early" if he wanted.

In both of these scenarios, Ben and Arthur were investing only $166.67 a month ($2,000.04 a year). Anyone can find $166.67 a month to invest, but you shouldn't stop there.

The more you save when you are young, then the more you will reap the benefits of compound interest. So....Start Investing Today (if you haven't already) and invest as much money as possible each month. 

Related: Start Building Wealth Today

Retirement Myth #3: You Will Never Be able to Retire

This myth is spewed from the people that keep complaining about the horrible economy and the lack of raises. This myth is for people that want an excuse to not save their money. These people will never retire.

They will continually spend their money, because they don't feel like they have a chance. We all have a chance, it's as little as saving $170 a month. Don't ever fall into this pity party trap

Start taking control of your finances today! As I showed you earlier in the article, retirement is attainable! You just have to be diligent and start saving for the future. You have to take the time to care about your future.

You have to care more about you finances than you do about the latest TV show. You have care more about your future than you do about have the latest and greatest things.

Most people care about the here and now and don't think about the future. You work too hard, to not have anything to show for it in retirement. You work and you work and you work some more. You have to have something to show for all of your hard work and I don't mean stuff.

I mean the ability to live comfortably after you no longer need to work. (Notice: I said comfortably and not exorbitantly). A comfortable life is all we need, and this is easily attainable in today's America.

All you need to do is START!

Reaching the Financial Summit, Starts with You!