Millenials are making the headlines and topping Facebook newsfeeds lately. The current generation of young adults is often critically stereotyped for their work ethic, tendency to social spend, latency in settling down, over-sharing their private lives, and short-term savings habits.A new survey that was released on Wednesdaycontributes to the mixed reviewson how 25-34 year olds are dealing with finances.
On the Radar, but far From Action: Retirement
According to the survey,over half of millennials have not started saving for retirement. This conclusion from the survey speaks more volumes about the economic crisis of the generation more so than the personal finance priorities of the current young adult generation.
The lack of long-term financial planning isn’t due to reliance on social security, delayed consideration because retirement is decades away, or a complete absence of concern. In fact, 39% of those surveyed worry at least once a week or more often about their financial futures and 76% say they’ve discussed their financial future with their parents. Instead, millennials find themselves practicing short-term savings habits to deal with overwhelming immediate expenses because of compounding factors like unemployment, increased cost of living, flat wage growth, and massive student loan debt. Millennials understand that saving is important, but feel unable to do so.
Addressing Long-Term Goals with Immediate Solutions
What can be done to address these issues? Since the majority of millennials are focused on balancing finances in the short-term before they can think about long-term financial stability, we should bring awareness to how saving for retirement can help in the short term. An incentive--affectionately called the Saver’s Credit--can help millennials kick off their retirement savings and save money on tax payments.
Tax Incentive: Saver’s Credit
The Retirement Savings Contributions Credit (Saver’s Credit) is a special tax credit that can help offset the first $2,000 in voluntary contributions to an IRA, 401(k), or other workplace retirement program. To qualify, savers must meet the following requirements:
- The maximum income of an individual (with a filing status of single) may not exceed $29,500;
- Married couples filing jointly may not exceed $59,000 in income, and;
- Heads of Household may not exceed $44,250 in 2013.
In addition, the following special rules apply:
- Taxpayers must be at least 18 years of age;
- Anyone claimed as a dependent on someone else’s return cannot take the credit, and;
- A person enrolled as a full-time student for 5 months out of the year cannot take the credit.
It’s important to understand that the Retirement Savings Contributions Credit can increase a saver’s refundor reduce the amount of money owed in taxes. According to the IRS, over $1 billion in saver’s credits were claimed in 2010.
If the Retirement Savings Contributions Credit isn’t enough to motivate 25-34 year-olds about saving for retirement, perhaps we can make saving for retirement rewarding through business partnerships. There are hundreds of payment and shopping apps on the market that offer discounts, gift cards, and merchandise just for transferring payments or uploading receipts. Perhaps financial institutions could partner with beloved brands to offer rewarding incentives for contributions to retirement products.
While retirement savings may be a reward in itself, what ways can you make saving for retirement while carrying the burden of cumbersome expenses more satisfying in the short-term? Join the discussion below.