Jeff Kempker, CEBS, CRC
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There are so many reasons not to care about retirement. It’s so far away. We have student loans to pay off. We are building a house. We just had a(nother) baby. We want to take a vacation. We want to buy a truck/boat/camper/iPhone, etc. It is so easy for the financial pressures of today to overshadow the financial necessities of tomorrow.
We tend to focus on the amount of our paycheck and think about all the stuff we need/want to buy. It’s hard to look ahead when there are so many pressing needs now. We don’t think about next month, next year, five years from now, and we definitely don’t think 30+ years into the future. But as difficult as it may seem, we need to try to strike a balance between taking care of our needs today while preparing for financial security in the future.
Before we know it, our kids will be grown and we will be in our 50s. We will turn around and wonder where our lives went. We will start to think about the future and how much time we have left. How much time we have left in our jobs and how much time we have on this earth. We will want to spend some of that time enjoying life without the daily grind.
A recent study found that Millennials want to retire around age 61. The problem is that most of us have no idea how to make that happen. And while some studies have shown more Millennials are saving for their retirement than previous generations, we’re not saving enough and don’t have a clue about what we should be investing in to achieve appropriate risk/reward.
This is why pensions are so important for Millennials. Those of you reading this are most likely members of LAGERS, a defined benefit pension plan. As a member of this plan, your retirement nest egg grows each month you work, regardless of market conditions. If you work long enough in your local government job, you will have earned a significant benefit from LAGERS that will be delivered to you every month for the rest of your life. This is important because this benefit represents money that you don’t have to save on your own. It will be a strong foundation on which to start building your retirement dreams.
Most likely, your LAGERS will not be enough for you to live the lifestyle you want in retirement. You will still need to put away some of your own paycheck to ensure you can retire without eating dog food everyday. Even saving a small amount each pay period can make a difference (read this article about the power of compound interest). Ask your employer if they offer a 457(b) deferred compensation plan (most likely they do) and start saving today! If your employer doesn’t offer a 457(b), open an IRA instead.
Do not take your pension benefit for granted. While pensions are still common in the public sector (over seven out of ten public employees in the U.S. have a pension plan), they are very rare in the private sector. In fact, only about half of private sector workers have access to any type of retirement plan through their employer and only about 20% of those have access to a pension plan like LAGERS. If you are thinking about leaving your government job and going to the private sector for a higher salary, consider the entire compensation package (retirement, healthcare, etc.) before making that leap.
Your pension benefit matters to you, no matter your age, because it can make up a significant amount of your retirement income. Use our online tool to learn how much you have earned to date and how much you could earn if you keep working. Take charge of your finances today so you can achieve true independence in the future.
Envision what you want your life to look like 20, 30, 40 years from now and make a plan to get there. LAGERS will be here for you.
