Younger Americans are far from worry-free when it comes to money. Here’s what’s on their minds.
Younger Americans are often flagged as financially irresponsible, caring little about their lack of savings and more about their social media feeds. But new data from Nationwide reveals that millennials have a number of near-term money-related concerns. Here are their top three worries in the next 12 months — and what to do about them.
An estimated 31% of millennials are worried about taxes, and while we don’t know exactly where their concerns lie, it’s fair to say that owing the IRS money could be a point of anxiety. The tax code underwent changes in late 2017 that many filers are still struggling to navigate. One issue that’s been prevalent is lower or absent refunds, due in part to the fact that withholding standards changed following the tax code overhaul that left more workers with extra money in their paychecks up front, but less money during tax season.
If you’re worried about taxes, it never hurts to speak to an accountant or tax professional and get some guidance, especially if you’ve owed a large sum to the IRS in recent years and expect a repeat this April. At the same time, understand what taxes you’re liable for so there are no surprises. You’ll pay taxes on any income you earn, including both your regular salary and any side gigs you might take on. Many people don’t realize they’re liable for taxes on the latter, so don’t let that trip you up.
2. The cost of healthcare
Healthcare is a tremendous expense for all generations, and 25% of millennials cite it as a major worry. If that’s how you feel, take steps to make your costs more manageable and predictable.
First, make sure you understand your health insurance plan’s rules. Simple moves on your part like staying in-network and obtaining the right referrals could spell the difference between having your services covered by your insurer or not.
Second, understand what costs you’re responsible for. You’ll probably need to pay a monthly premium for your health insurance, which your employer may or may not subsidize, as well as an annual deductible, which is the sum you’re responsible for before your insurer pays for your healthcare. Your plan will also likely come with copays, which are due when you see a doctor or fill a prescription, or coinsurance, which is the portion of your care you need to pay for.
Finally, be savvy about prescriptions if there are drugs you take regularly. Renew your medications in bulk to save on their cost, and always ask if a generic version is available, which could lower your copays substantially.
3. Saving enough for retirement
A good 25% of millennials worry about saving enough money for their senior years. That’s a valid concern, since retirees without savings risk struggling financially.
The good news is that if you’re a millennial, you have plenty of time to sock away funds for retirement. First, find the right place to house your savings. If your employer offers a 401(k) plan, that’s probably your best bet, especially if you’re eligible for matching dollars for making contributions. If you don’t have access to a 401(k), you can open an IRA though almost any bank or financial institution.
From there, you’ll need to fund your account consistently and invest your savings aggressively — namely, by loading up on stocks for maximum growth. But if you’re 35 years away from retirement and you manage to set aside $300 a month in either an IRA or 401(k) over the next 3 1/2 decades, you’ll end up with close to $500,000, assuming your investments generate an average annual 7% return during that time (which is a few percentage points below the stock market’s average). Make it $500 a month, and you’ll be sitting on close to $830,000, assuming that same average annual return and savings window.
It’s natural to have financial concerns at any age. If the worries above apply to you, you can overcome them by reading up on taxes, understanding your health benefits, and getting into the habit of funding a dedicated retirement savings plan. Some fairly painless steps on your part could give you more peace of mind and make you feel better about your finances on a whole.
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