Wealth Management Strategies for Millennials

by | Dec 5, 2020

We often hear from millennials who know they’re supposed to start planning for their financial futures and retirement. However, many just aren’t sure what proper wealth management strategies are.

1. 401k Advisors Help You Decipher Your Current Plan

Before you start the 401k rollover process, meet with your 401k advisor to discuss your options. Bring your current plan’s most recent statement and documentation with you, so you’ll know:

  • Your current balance
  • How much you’ve contributed
  • How much your employer matched
  • Your account’s growth

You should also contact your plan administrator and have them walk you through the 401(k) rollover process. Your advisor will work with you to identify which funds your account is invested in the portfolio and its associated growth patterns.

Millennials must take it upon themselves to start saving for their futures now, using investment avenues such as 401(k) plans and Individual Retirement Accounts (IRAs).

This is understandable; Millennials are currently focusing on things like graduating from college, paying down student loans, and landing that first job. Retirement wealth management strategies for something that’s 40 years or more in the future may just not feel that important. Given the economy’s current state, new college grads may not have jobs that pay enough to put much into savings.

But given the dwindling availability of pensions and other traditional social support systems —  a 2014 report from the Social Security Administration forecasts that the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust fund reserves will be depleted by 2033 — millennials must take it upon themselves to start saving for their futures now, using investment avenues such as 401(k) plans and Individual Retirement Accounts (IRAs).

Here’s where retirement planning advisors suggest that they start.

Millennials must take it upon themselves to start saving for their futures now, using investment avenues such as 401(k) plans and Individual Retirement Accounts (IRAs).

Strategic Financial Planning: Do Millennials Know Where to Start?

For Generation Y, a lack of basic investment knowledge prevents engagement in the financial planning process. Studies indicate that, as a group, American teenagers lack financial knowledge and skills; this may lead to a lack of confidence that prevents them from taking charge of their financial futures. 

Millennials also have the greatest student loan debt burden of any previous generation, with little social financial support; a 2014 study from the Pew Research Center found that more than 80 percent believe that they’ll receive reduced or no benefits from Social Security when it comes time to retire. 

Then there’s the economy. While this generation may be most educated thus far — hence the student loan debt — they’re also more likely to be un- or underemployed. All of these factors point to millennials needing to take control of their finances and invest in their future. 

Investment Guidance: Harness the Power of Compound Interest

Fortunately, this generation has one important factor on their side: Time. With a long time horizon, millennials can start small and compounding interest work to grow their nest eggs. Having several decades to invest means that there’s time for portfolios to recover from market corrections or more severe moments like those in 2008. 

It also means the millennials can start small — like really small — and still have time to grow their investments. By following financial strategies that include regularly contributing to a 401(k) and an IRA, then letting those funds grow through compounding interest, millennials can continue to increase their contributions over time as they receive promotions and raises. 

And when we say the power of compounding interest, we’re not kidding. For instance, we see that starting with an initial investment of $500, contributing just $200 per month for 40 years at an interest rate of 7 percent leads to a future value of just under $500,000. 

It’s most important for millennials to simply start investing now, and keep on contributing through time. Even starting small can pay off in the end — after decades of wealth planning.

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