It’s not too late for millennials to create wealth. Here is what to do

Older millennials are now approaching their forties and have experienced some major setbacks that have kept them from building wealth in their adulthood.

First, they were hit by the 2008 recession – then, the worst economic downturn the United States had seen since the Great Depression – just as it entered the workforce. Then, just over a decade later, the coronavirus pandemic and another record-breaking recession struck, leaving millions unemployed.

The group was also grappling with student loan debt, which reached $ 1.7 trillion in 2021.

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Yet personal finance experts say it’s not too late for older millennials to build wealth and prepare for retirement. It might just take a little extra work.

“You can catch up, you absolutely can do it,” said Linda Farinola, certified financial planner and president of PFG-Financial Planning and Management in Princeton, New Jersey. “But one of the things you have to recognize is that you have to set some kind of goal or a plan and commit to making choices.”

Accept where you are

Even if you are starting your wealth building journey later in your 30s or 40s, or even starting over after a setback, it is important to understand and accept exactly where you are financially.

“You are not alone and should not be embarrassed to seek help or ask questions,” Farinola said. “Everyone has had setbacks.

According to Marco Rimassa, CFP and president of CFE Financial in Katy, Texas, it doesn’t help to dwell on what you wish you had done earlier, either.

“Let’s focus on the best way forward and maximize the opportunities that are available to us rather than what should have happened,” he said.

Take an inventory of your net worth – debt, assets, savings, and more – to determine what work needs to be done.

One thing on the Millennial Corner is that for many of them, saving for retirement has been automated through employer sponsored 401 (k) plans.

“You have a lot of millennials who have saved up in their 401 (k) plans and they don’t realize it,” said Jacqueline Schadeck, Atlanta-based CFP. “So it helped a lot of people.”

Revise your idea of ​​retirement

If you’ve started saving later, or find your situation is worse than you thought, you may need to rethink what retirement will be like for you.

It could mean reducing the size of your home, moving to a location with a lower cost of living, or cutting expenses, he said. It can also mean working longer.

“The easiest way to cope with a late start is to change the goalposts,” said Rimassa.

Currently, social security considers full retirement to be 67 years for people born after 1960, but those who wait past 70 to receive their benefits receive a larger monthly amount. Waiting until then to start retiring still gives older millennials three decades to save and plan.

Setting that goal while you’re still years away can help you reach it more easily and get excited about it, he said.

Make a plan that works for you

Once you have a retirement goal, make a plan that works within your budget and on your schedule.

“Accept what can be controlled and then commit to that particular course of action,” Rimassa said.

In the years leading up to retirement, maximize your savings in an employer-sponsored 401 (k) account (including corporate correspondence) or other individual retirement account, such as a traditional or Roth IRA.

Those who are late may want to lean on their 401 (k) to help them catch up, Schadeck said. These accounts have higher limits – those under 50 can save $ 19,500 in 2021 and those 50 and over can contribute an additional $ 6,500 as well. Roth IRAs, on the other hand, have a maximum contribution of $ 6,000 this year and an additional $ 1,000 for those over 50, as well as certain income limits for who can use them.

To maximize assets in a shorter time frame, people also need to make sure that they are not invested too carefully, Rimassa said.

Leveraging employer benefits now can also help people save for the future, said Michelle Petrowski, CFP and CEO of Being in Abundance in Phoenix.

She recommends using health savings accounts, which you contribute to before tax and can carry over from year to year with the unused money. Even using flexible spending accounts or plans for dependents – which typically use pre-tax dollars – can help you find money in your budget to save for retirement, she said. .

Transfer of assets

Of course, some millennials have another big advantage on their side: the generational transfer of wealth that will see some $ 68 trillion passed from parents to children.

This could be a massive boon for millennials, but should be used with care to maximize the impact.

“The first rule of thumb is not to view it as disposable income,” Rimassa said.

One thing advisers don’t recommend is trying shortcuts to building wealth, like investing heavily in meme stocks or buying lottery tickets.

“When people have the mentality that the only way to get there is through some kind of miracle, they’re going to throw the ball as far as they can and see what happens,” Rimassa said. “That’s when I think they are in trouble.”

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Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.