I am going to be 29 years old next month, and I’m seriously behind on my retirement savings. Not knowing what to do next, I asked a 24-year-old financial planner how I can catch up. He said I need to increase and diversify my income, and save 20% of everything I make. Next month, I’ll be celebrating my 29th birthday. On one hand, I feel ready to approach 30. I just got married recently, my career is going well, and I certainly feel much wiser than I did a decade ago. There is one area of aging, however, that I have almost completely neglected: my retirement savings.
I’m not alone when it comes to this. According to a study by Vanguard, the median retirement savings for Americans between the ages of 25 and 34 is only $14,000. Common advice about retirement savings is that you should have about one year’s salary put aside for retirement by the time you’re 30. Unfortunately for me, my personal retirement balance is much closer to that $14,000 median than it is one year’s salary.
I can’t speak for everyone else in this boat, but my savings are lagging for a couple of reasons. I had prioritized paying off my student loans as quickly as possible in my early 20s and I also job-hopped during those years, which caused disruptions in my 401(k) contributions.
I also just didn’t prioritize it because I was young, and things that I wanted or needed in the moment just felt more important than saving for something like retirement, which felt like such a distant future goal.
That said, as I get older (and as I learn more about personal finance and investing) the more I realize that I messed up, and that I need to make up for lost time now. So, for the last couple of months, I’ve been trying to figure out how to do that.
So far, most of the advice I’ve gotten from older relatives has been unhelpful — ranging from “You should have been saving earlier for sure” to “I don’t know, I have a pension to fall back on.”
Researching online hasn’t been much more helpful. Many of the results that came up during my search were about the power of compounding interest when you’re saving in your early 20’s (now a long-lost opportunity cost for me) and about how most people my age don’t have enough saved for retirement and will be working much longer. That just depressed me further.
So, I took the opportunity to sit down with Nate Hoskin, a 24-year-old certified financial planner and TikTok influencer who uses his platform to talk about the unique needs of Gen Z and millennial workers when it comes to wealth-building and money management. When we got on the topic of retirement, Hoskin said that it’s one of the most important topics that needs to be addressed for younger workers, and said that we have to think about retirement completely differently.
“I do not know many people at all in my age cohort that have any intention of retiring in the traditional way,” Hoskin said.
When asked what he meant by that, Hoskin said that there are a variety of reasons as to why retirement will look radically different for new generations of workers.
“We do not trust that we will receive social security, we still know that it’s overloaded and continuing to be overloaded — not to mention the fact that we are going to be living considerably longer than anyone else before us,” he elaborated. “The amount of time you would expect to spend working and the amount of time you would expect to spend retired are becoming closer and closer to the same length, and it’s really hard to effectively create a retirement strategy around that.”
So what does he suggest, when working with clients who are my age and in need of some more padding for their golden years? Hoskin said that there are 2 big ways to tackle retirement in a non-traditional way that can help.
Save at least 20% of what you make — if not moreSomething I have heard before is that I should be saving at least 10% of my income toward retirement, but Hoskin told me to double that savings rate.
“I do believe that people should be putting away at least 20% of everything that they make,” Hoskin said, adding that in some cases he advocates cutting corners and finding ways to save upwards of 40% of your income.
“But I need to quantify that, because I don’t want you to be miserable now,” he said, adding that many people in their 20s take an attitude of “why would I be miserable now when I’m young and able and energetic, just to try to buy a little bit of freedom when I’m older?”
However, he also said that it’s important to push past this and try to think about it as a form of security that buys you the option of leaving the workforce earlier than you would have before.
“You can save all of that money right now because you don’t need it,” Hoskin said. “If I want to just quit my job and not do a single thing — to go rot on a beach — I want that capacity.”
Increase and diversify your streams of incomeWhile increasing your savings rate is really important, Hoskin said that what’s even more important is for younger workers to increase their income, or adopt multiple streams of income.
Hoskin said that this can partially be achieved by increasing your salary by climbing the corporate ladder and maximizing your ability to earn in your day job.
However, something he advocates more is finding ways to make streams of passive income, or to freelance on the side. Some examples he gave are writing books and receiving royalties, or taking the time to learn about how to invest in real estate.
The process of developing multiple streams of income is something that he stresses takes some time to cultivate, and said it won’t happen overnight.
“I don’t necessarily mean that you should go start an Etsy side hustle and hope that it replaces your income forever,” Hoskin said. “But it should definitely be a series of small things, because you can do little things on the side while you work your full-time job.”
Hoskin himself has adopted this idea into his own life, and said that he often tries to find new side hustles that he can do with his friends.
“We’ve tried out crypto mining, we’re looking at buying land and building ‘glamping’ facilities on it,” Hoskin said. “It doesn’t really matter because what we want is just to find a series of things that are interesting and cool and can make us money.”