5 Tips for Parents to Help Their Kids Get Started With Retirement Planning

By Mark Henry

ItΓÇÖs a whole new world for recent college graduates entering the workforce. Their priorities have changed. Now bills, rent, and student loans lead their monthly list.

Retirement planning ranks low as a priority for many young people in the early stages of their careers. About two-thirds of Millennials have nothing saved for retirement, according to a report by the National Institute on Retirement Security, and financial specialists say waiting to save could end up significantly delaying their retirement.

This is when parents can step in and advise their young adult kids on how and why to start a retirement plan now ΓÇô before too many years roll by.

Many people early in their work life figure retirement isnΓÇÖt worth thinking about because itΓÇÖs so far down the road, and theyΓÇÖve got other obligations. But getting a late start is a big mistake. First of all, theyΓÇÖre missing out on valuable years of compounding returns.

Mom and dad are near or in retirement now and know the importance of saving as much as you can as soon as you can, especially in todayΓÇÖs world. They can be huge assets of knowledge and wisdom for their grown children right now.

Here are five tips that parents can pass on to their young-adult children to help them start planning for retirement:

• DonΓÇÖt wait. Explain to them the importance of beginning retirement savings just as that new job starts. While they reason that their salary is low as they start out and they have bills, they need to make saving a disciplined habit, starting with just a little. ItΓÇÖs not going to be easy to start saving later; you make more money, but then youΓÇÖve got more expenses. So start the important life habit now, and it will be easier then.

• Learn the basics. Retirement planning can be a boring topic to some young people, but tying its importance to a new job that gives them a big opportunity to get ahead financially can instill pride in learning some of the retirement basics. Young workers should at least understand the purpose of target-date funds. Many plans offer these funds, which automatically adjust how a personΓÇÖs money is invested based on their age and how close they are to retirement.

• Capitalize on the 401(k). Their parentsΓÇÖ generation profited from this. Throw in the fact that pensions are gone for the most part ΓÇô and their parentsΓÇÖ generation felt the brunt of this fall-off ΓÇô and the kids should pay heed to a great way to save. And the percentage a company matches the 401(k) is an important consideration.
• Increase contributions over time. Financial advisors generally recommend that you save between 10 percent and 15 percent of your pay for retirement. ThatΓÇÖs usually too high for someone in their 20s, but you can work toward that goal by increasing your contribution by one or two percentage points every time you get a raise.
• Stick to an honest budget. Help them learn to budget money with three simple categories: give, save and spend. With this foundation, theyΓÇÖll learn how rewarding it is to set a savings goal and regularly put aside money to reach it, which is the basis for successful retirement investing.

Parents today know the younger you are when you begin retirement investing, the more money you can have when itΓÇÖs time to retire. They need to emphasize that to their kids, and they can teach them by starting with simple concepts and building on them over time.

Mark Henry is a certified estate planner and founder/CEO of Alloy Wealth Management (www.alloywealth.com). Known as ΓÇ£CharlotteΓÇÖs Premier Wealth CoachΓÇ¥ as a radio host on WBT News Talk 1110 AM/99.3 FM, Henry has more than 30 years of experience in business and finance. He is also an investment advisor representative.