A lot can happen over 40 years.
You’re likely to change jobs upwards of 10 times, according to Bureau of Labor Statistics averages. Odds are good you’ll get married and have kids. You might buy a house or get a dog. You’ll eat over 4,000 pounds of potatoes, assuming consumption averages from the National Potato Council stay steady.
What you likely won’t do is die, at least statistically speaking. A woman who turns 30 this year is expected to live another 55 years, according to Social Security’s estimates. A man will live another 51. And yet according to new research from PGIM Investments, more than a third of Millennials say they “don’t see the point of planning for retirement because anything can happen between now and then.”
There’s a lot of irony in that perspective, because the fact that anything can happen is precisely why you should save.
Save for freedom, not retirement
It might be difficult to imagine any of the above events happening, let alone retirement on a white sandy beach. And if you can’t imagine the future, it’s hard to save for it.
So don’t, says Sophia Bera, a certified financial planner and founder of Gen Y Planning in Austin, Texas. “The reality is we really don’t know what retirement looks like for Millennials, so what I talk more about is setting yourself up for options and flexibility.”
Having money saved and invested gives you financial security. That security may allow you to retire one day, yes — but it could also allow you to take a job that pays 25% less but makes you 100% happier, or to take time away from work altogether to travel or have kids.
“If you save $1 now, you’re basically giving a gift to your future self. You can do anything you want with it,” says Brian McCann, a certified financial planner and founder of Bootstrap Capital in San Jose, California. “If you’re 30, looking at retirement in 35 years isn’t particularly fun. But if you have other aspirations — you want to take a sabbatical, pursue a passion job — building your savings gives you optionality for your future. Not just retirement, but any future.”
Save for the hard times, too
Building your savings also puts you in a better position to weather the unexpected. And while you’re much more likely to reach retirement age than die early, your chances of encountering a financial blow at some point in your working life are pretty good.
Layoffs are more rare right now, but unemployment will almost certainly rise again before millennials retire. Likewise, more than 1 in 4 of today’s 20-year-olds will experience a disability that takes them out of the workforce for at least a year prior to retirement age, according to the Council for Disability Awareness. Even if you’re not one of them, there’s a good chance you’ll spend some time in the future caring for someone else, like an elderly parent.
All of that makes the case for saving more when you can, because there are likely to be times in the future when you’re forced to dial back your savings rate or pause saving completely.
“There are certain things we just can’t anticipate,” Bera says. “If you contribute more to retirement accounts when you’re young, compound interest works on your side.”
Thanks to stock market returns, money you’ve been able to invest can continue to grow despite no additional contributions. It can also serve as a crucial lifeline if needed — retirement accounts are notoriously strict about early distributions, but one variation, the Roth IRA, allows owners to pull out contributions at any time. (See our full rundown of Roth IRA rules for more details.)
Balance today and tomorrow
If saving for the future didn’t require sacrifices today, we’d all do it. But that trade-off is what holds many people back: If you don’t know what’s coming, why not live in the moment and worry about tomorrow, tomorrow?
If you’ve ever woken up to a sink full of dirty dishes, you know the answer to that question — when tomorrow comes, you almost always curse lazy, last-night you. The trick to avoiding the retirement version of that scenario is to make today’s sacrifices less painful.
Start by putting a number on how much you should be saving each month, even if you can’t get to that goal right away. (A retirement calculator can help here.) Then put real thought into your values, McCann says, to find the money to reach that retirement goal and enjoy life in the present.
“What I like to have people do is spend freely on the things that are important — the things that give them satisfaction and joy. Then be ruthless with everything else,” McCann explains.
That could mean budgeting in travel if it’s important to you, but forgoing things like cable or eating out so those travel expenses don’t cut into your ability to save. Or maybe it’s writing your own version of the American dream.
“We can easily fall into the trap where we look around at what everyone else is doing and assume that is the de facto norm,” McCann says. “But if you go through the exercise of thinking about what’s important to you, you may find you can do without the things you’re ‘supposed’ to have, so you can have some of the things you want without spending on autopilot.”
