A Millennial’s Guide to Planning for Retirement

If you type “will millennials…” into Google, the first suggestion is “will millennials ever be able to retire?” It’s a question that trumps almost any other conversation about millennial life. We’re the generation least likely to be on track for retirement and most likely to deal with unemployment. A study from the investing site Nerd Wallet projected most millennials won’t be able to retire before they’re 73.

Like most young people, I’m freaked out by this. I want to be playing croquet in Florida when I’m 73, not blogging on the internet. But I also know very little about what to actually do with my money. I’m slightly embarrassed to admit it, but I also know I’m not alone. A few years ago, the US Department of Treasury and the Department of Education gave high schoolers a test on financial literacy. The average score was a 69 percent.

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Young people aren’t getting a whole lot of financial advice, either. I remember a six-week “financial literacy” course in high school, where we learned things like how to balance a checkbook—a skill that became all but obsolete with the invention of Venmo. Financial planners haven’t traditionally courted young people, probably because young people tend to be poor. (According to a survey from earlier this year, less than 30 percent of financial planners target people under 40). That may be starting to change, though, as millennials take up a larger portion of the workforce.

One adviser courting millenials is Sophia Bera, founder of Gen Y Planning, who Money Under 30 named one of the “top financial advisors for millennials” and who is a millennial herself. I reached out to Bera to find out what 20-somethings like myself should do to beat the odds and retire at 65. To my dismay, she paused, and then gingerly delivered this bad news:

“So, here’s the thing,” she said, “Why do you want to retire at age 65? You’re probably going to live until you’re 100—what are you going to do for 35 years?”

My conception of retirement was all wrong, she said. The age 65—what many people consider the “standard” age of retirement, comes from the Social Security Administration’s age at which full benefits are paid out. The thing is, Social Security was never meant to pay for decades of Bingo games in cushy Florida retirement homes. It was designed to provide a safety net for people who were living out the last few years of their lives. When the Social Security program was first introduced in 1935, life expectancy for Americans was in the low 60s. Today, the life expectancy is 78 years for men and 81 years for women. And that number is only getting higher.

So, as Bera gently explained, we’re probably not going to retire at age 65. With that illusion shattered, I asked Bera and other financial advisers what I could do to put myself in the best position for when I can eventually retire. Consider this the syllabus for Retirement Planning 101.

Forget Everything Your Parents Told You

First, some good news: You are not turning into your parents. (In the retirement landscape, at least. I can’t make any promises about your personal life.)

The way millennials approach work is really different from previous generations. For one thing, we see ourselves working longer in a field we enjoy, contributing to something we actually care about rather than just collecting a paycheck. In a survey from TransAmerica Center for Retirement Studies, half of millennials said they planned to continue working even after they’d “retired”—which is insane, but also says something about how our generation feels about our jobs. We’re also more likely to be entrepreneurs or have flexible jobs within the “gig economy.”

The same survey also found that 70 percent of millennials are already saving for retirement, which is another big difference between young people and our parents (the median age for starting contributions to retirement account was 22 for millennials, compared to 27 for Gen X and 35 for Boomers). That’s in part because, unlike our parents, we expect to have fewer resources like Social Security to fall back on, and are more focused on independently generating retirement savings.

In the past, you could map out your retirement to some degree of accuracy by tabulating your income, your living expenses, your pension, your Social Security benefits, and so on. Add two kids, subtract a mortgage, collect some investment returns, add water, stir, and enjoy. Bera says there isn’t a formula like this for millennials—even metrics like AARP’s Retirement Calculator aren’t very helpful—because the way millennials work is so different.

“I think that unconventional retirements are going to [become] more common, where you work really hard for five years and then you decide to switch jobs—but before you do, you backpack around Europe for a while. You’ll see more and more people taking breaks,” Bera said. And it’s more likely to see people reentering the workforce after a break or transitioning into part-time work after they’ve “retired.”

With Baby Boomers, it’s like, you do your career for 40 years, and you get your pension, and that’s why you need to stay there,” said Bera. “But that’s just not the case anymore. Millennials really want meaningful careers because we know we’re going to be working for the next 50 years.”

Start Saving Money, Even If It’s Just a Little

I know, I know, saving is easier said than done. Especially when you’ve just started working and are suddenly flush with cash (not really), it can feel like you’ve got stacks on stacks of Monopoly money to throw around. Resist that urge. Take your Monopoly money and plant it somewhere safe and let it grow.

Have you ever heard those financial parables where it’s like, Arielle starts saving $1,000 a year when she’s 20. Mike doesn’t start saving until he’s 35, but he puts away $5,000 a year. When they’re both 70, who will have more money saved? It’s me, obviously, because I started saving earlier.

This is what financial people call the “magic of compounding”—or, as certified financial planner Karen Carr explained, “the idea that a dollar you put into your retirement today actually earns money over time, and then beyond that, those earnings then grow on themselves.” Carr works with the Society of Grownups, an organization that aims to make millennials financially literate.

“As millennials, we really have time on our side, so we should take advantage of that,” Carr said. “When you’re in your 20s and have at least 30 more years to work, that’s a long time for those earnings to grow.”

The maximum growth depends on where you stash your savings. Most advisers recommend putting away part of your income in a 401(k) or a Roth IRA, which are retirement-specific investment accounts (more on those later). If you put your money into an investment fund with tax deferral, like a traditional IRA, then you can actually make even more money by delaying the taxes you pay on your retirement savings. It’s also not a bad idea to put some money into a high-yield bank account, where you can get as much as 1 percent returns on the money you leave sitting in there.

Deal with Debt, But Save a Little Cash First

The problem with saving money, of course, is that it means you can’t spend that money. I’m not just talking about buying a round of tequila shots or paying your Netflix subscription, but also real stuff, like paying off student loans.

Debt is a real bitch, and unfortunately it’s also a financial reality for most young people. According to a Wells Fargo study conducted last year, 47 percent of millennials put more than half of their monthly income toward paying off their debt, making it their primary financial concern after day-to-day bills. That means a whole lot of young people are struggling to pay both their massive debts and everyday expenses, let alone find extra money to save.

If you’re drowning in debt, Carr says you can’t just ignore it. (Sorry. I don’t make the rules.) “First, pay the minimum on all the debt you have. You want to keep your credit history clean, keep up with that debt, and hopefully get you at a good starting place to be fully paying it down,” said Carr.

Read: I Asked an Expert What Would Happen if I Just Stopped Paying My Student Loans

But before you start aggressively paying off all that you owe, you should first create a buffer in your bank account, which financial advisers call an “emergency fund.” The purpose of this fund is to have a cushion for unexpected expenses—your car breaks down, you get laid off, you get viral meningitis and rack up an expensive hospital bill, etc.—so that you don’t end up with even more debt.

“We don’t want to have absolutely zero cash in the bank in case something happens and then you have to rely on a credit card,” explains Carr. The fund should ideally have three to six months of your salary stashed away, but even $1,000 is better than nothing.

Once you have your emergency fund in place, you can start paying off your debt more aggressively. But Carr doesn’t agree with the idea having debt should dictate your financial decisions. “If you sit in the dark and live in a tiny house, you’ll pay off your student debt, sure. But what if you still want to go to happy hour in the meantime?” said Carr.

“I’ve met with people who have hundreds of thousands of dollars of student debt and are really focused on paying that off as quickly as possible—they’re being incredibly aggressive—but other people say, ‘Actually, I want to buy a home, and I want to be saving for that while paying off the debt.’ It’s really about thinking about what you want and creating a plan to get there.”

Sign Up for a Retirement Savings Program

If you’re a young person with a job, good for you. This means you probably have a retirement program set up through your employer. In most cases, this will be a 401(k) plan, an employer-sponsored investment fund for which you can put in a chunk of your income tax-free. Sometimes employers will match your contributions—say, a dollar for every dollar you put in up to 5 percent of your gross pay—which is basically free money. The money you put in there sits and grows until you’re 59-and-a-half, at which point you’re allowed to take it out (there are penalties for taking it out sooner) and reap the rewards of doing absolutely nothing.

Depending on your salary and your expenses (including debt payments), it might not be feasible to put in a huge percentage of your income into your 401(k). Carr recommends contributing at least as much as the company will match, since “not taking advantage of it is like your employer giving you a bonus check and you telling them to keep it.”

Mary Beth Storjohann, creator of the Gen Y financial planning firm Workable Wealth, says that her number one piece of advice to young clients is to start saving money in a 401(k). “Retirement is a long way off for many millennials, so it can be easy to put saving on the back burner.” Still, she says, starting a retirement account—and contributing to it each month—is the best thing you can do for your financial future.

If you don’t have a traditional job—like if you’re freelancing or working for yourself—you can set up a Roth IRA account in lieu of a 401(k). Unlike 401(k) plans, you have to pay taxes on the money you put into a Roth IRA, it’s not automatically deducted from your paycheck, and there’s a limit on how much money you can put in ($5,500 each year in a Roth IRA, rather than a percentage of your salary in a 401 (k)). Roth IRAs also let you access your principal (the amount of money you deposited in the first place, but not the interest) whenever you want, which makes them a more flexible option. If you wanted, you could open both a Roth IRA and 401(k) plan to maximize your retirement savings. Either way, Storjohann says to “follow a ‘set it and forget it’ mentality and you’ll get into the habit of paying yourself first.”

If Your Income Is Too Low, Increase It

One of the common things financial planners hear from younger clients is that they aren’t making enough money to service their rent, their student loans, and their weekly binge-drinking habit, while also saving a meaningful amount. Bera said that while the common advice is to tell clients to cut back and readjust their budget, “the other thing you can be doing is earning more money.”

Bera is a big advocate of the side hustle: Instead of making big compromises to your spending habits—by, say, cutting $500 out of your monthly budget (goodbye, SoulCycle)—she suggests making some extra cash on the side. I balked when she suggested I add additional work hours into my already-intense workweek, but Bera explained the side hustle can be as low-key as babysitting, dog walking, Uber driving, tutoring, selling your weird shit on Etsy, and so on.

Trying to increase your income? Take a lesson from Noisey editor Dan Ozzi, who sold Brooklyn air on eBay for $20,000.

This kind of multi-job lifestyle is becoming increasingly common among millennials—by some estimates, 35 percent of millennials have a “side business” in addition to their main job. That either says something about how our generation views earning potential or how poorly our generation is getting paid.

Either way, you shouldn’t be living paycheck-to-paycheck, and if you are, then it’s worth thinking about how you can change it. Like starting an adult preschool. Or writing other people’s college admissions essays ($2,000 in two weeks, people!). Whatever works for you.

While You Save for Retirement, Remember Retirement Isn’t the Only Goal

No one wants to eat cat food when they’re 80 because they didn’t have enough money saved up for retirement. But nor should we have to eat cat food in our 20s for the sake of saving for our retirement.

“If your biggest priority is to be able to have savings for the purpose of retiring as soon as possible, can that be realistic? I suppose so,” said Carr. “But more people like the idea that they want to enjoy their life now—to take a trip and have kids and buy a house, or whatever. I want retirement to be a piece of that, but it doesn’t have to be the only priority.”

If you’re not convinced yet, consider this paper, published last year in the Journal of Mathematical Economics. The team of economists pointed out that a lot of people die earlier than they expect, making their savings moot. “Suppose you spend your whole life saving and saving for retirement, but you die the year before you retire,” the study’s author, Marc Fleurbaey, said in a press release that accompanied the study. “On an individual level, you might have been better off if you consumed more, earlier in life.”

Grim, I know, but it adds some credibility to the idea that planning for your retirement should be secondary to enjoying your life right here and now. You don’t have to feel too guilty about dropping dollars on things that mean something to you. Your 80-year-old self will forgive you.

Follow Arielle Pardes on Twitter.