Few Gen Z adults are saving for retirement, with only 1 in 5 members of Gen Z contributing to a retirement account. This hesitancy to invest may be driven by fear and feelings of financial vulnerability. Many young adults may not have a robust financial education or are just starting their careers, making long-term thinking challenging. It’s crucial for young people to participate in the market to achieve their investment goals, according to financial experts.
For young professionals looking to plan for long-term goals like retirement, a Roth account is a smart option. Roth accounts, such as Roth 401(k)s and Roth IRAs, allow you to contribute post-tax dollars, meaning you won’t owe any additional taxes when you withdraw the money in retirement. This type of account is ideal for those who expect to be in a higher tax bracket in retirement, such as young professionals early in their careers. It’s important to take advantage of any matching contributions offered by your employer, as it is essentially “free money.”
If your company doesn’t offer a Roth 401(k), consider opening a Roth IRA instead. The income limit for a Roth IRA in 2024 is $161,000 for single individuals, making it a suitable option for young professionals who are still early in their careers. Your Roth IRA can serve as both short-term and long-term savings, allowing you to withdraw contributions without penalty in case of an emergency. However, you cannot withdraw earnings without penalty before age 59½.
Once you’ve set up a Roth IRA, it’s essential to fund it. In 2024, individuals under 50 can contribute up to $7,000, while those 50 and older can contribute up to $8,000. However, it’s crucial to remember to invest the money you contribute. Seek out a financial advisor or online resources to make informed investment choices that align with your financial goals. Just as you would consult a nutritionist before making dining hall choices in college, meeting with a financial advisor can help you make better decisions for your financial future.
It’s important to treat your Roth IRA as a long-term investment, setting it and forgetting it for a significant period. While you can withdraw contributions without penalty, it’s crucial to resist the temptation to touch the funds for non-essential expenses. Investing in a Roth IRA early on can provide financial security in the long run and help young adults build a strong foundation for their retirement savings. By following these tips and strategies, young professionals can take control of their financial future and set themselves on a path towards long-term financial success.
In conclusion, it’s never too early to start investing in your future, especially when it comes to saving for retirement. By taking advantage of Roth accounts, contributing regularly, and making informed investment decisions, young adults can set themselves up for financial stability and success in the long run. Consulting with a financial advisor and using online resources can help navigate the complex world of investing and ensure that you are making the best decisions for your financial future. With careful planning and smart financial strategies, Gen Z adults can overcome their hesitancy to invest and build a solid foundation for their retirement savings.
