A study from Urban Institute found that as of
2022, nearly 40% of millennials were on track not to
have enough money save for retirement by the age of
70.
Well, with suggestions of even potentially raising the Social Security
retirement age in the coming years,
it's more important than ever for young people to save
as much as they can.
So joining me now to advise us on how to
make sure our money can work for us in our
golden years
is CEO of Ty Young,
Wealth Management at Ty Young himself.
Ty, welcome.
Thanks, Tracy, for having me.
It's good to see you.
Yeah, it's good to have you as we start the
second quarter together.
So why are you finding that millennials and Gen.
ZI don't have enough money save for retirement?
It's they're just not focused on,
they're focused on, you know,
raising children and buying houses.
And it's just not their number one focus.
But the reality is that if you're 20 or 30
years old,
you have a tremendous advantage over people like,
you know, myself or even Warren Buffett because you have
time.
Warren Buffett would probably trade his fortune to be 20
or 30 years old again.
So you have an advantage he doesn't have.
And when you're when you're thinking a millennial millennial and
you're thinking about retirement,
he's got to keep it simple.
There's three main steps. You take advantage of compound interest.
You legally avoid taxes and you and you keep it
simple,
right? If you have a four O 1K,
you should take advantage of that four O 1K take
the match.
The match is free money,
so at least put as much in there to get
the match.
If you can Max it out,
that's great. And then Roth IRA is fantastic as well.
I mean, one of the biggest expenses we're going to
have
over the next 20-30 forty years is taxes.
Millennials are going to have that expense so they can
avoid those taxes.
That's huge. So they start a Roth IRA.
That money they make in there is tax free money.
Listen to this, if you put
$7000 and that's the Max you can put into a
Roth IRA
right now if you're under the age of 50.
So if you're a millennial,
you can do that. If that money grows at market
rates of return based on history,
that's $7000. If you're 20,
when you're 7050 years from now is worth over
$800,000. That is the power of compound interest.
So millennials should be encouraged because they have time for
the magic of compound interest.
It is definitely something that I think you know more
education is is key here,
certainly Ty. So I'm glad that you can join us.
I also see, according to a 2020 up work report,
that nearly half of millennials and Gen.
Z work freelance jobs. And So what are some of
the retirement savings solutions perhaps outside of that traditional
4O1K?
Well, the Roth IRA that I just mentioned is fantastic.
If you have earned income you can put money into
that.
If you own your own business
you can. You can start a number of different kinds
of retirement plans.
A Sep IRA is a fantastic one because you can
put a lot more than
$7000 into that. As a as a self-employed type into
individual
you can use an annuity.
An annuity will allow your money to grow tax deferred.
So there's a number of tax
free or tax smart options that you have as a
millennial to take advantage of compound interest.
And again if if you avoid taxes you get to
make money on the money that you would have sent
to the IRS,
compound interest in the money that you would have sent
to the IRS.
So that's that's huge and a suggestion as an investment
what what I would say if you're 20 or 30
years old,
you've got time to absorb the the volatility of the
market.
You can use a very low fee index fund on
that and you know,
allow your money to to grow.
If you're a little bit risk averse,
there's options that you have where your money is protected
and gets losses and you can still grow your money
as time goes on.
But what I would say to to millennials,
just get started, get started soon,
put as much money in as you can and something
is always better than nothing,
right? If you can do something,
do something, get started, generate some momentum,
right. If you can live below your means and not
every millennial can.
It's not easy out there right now with inflation the
way we've had.
I recognize that. But if if you can do something,
do that you get 10%
of your income and put that away over a long
period of time,
that will be meaningful to you.
You don't want to be part of the percentage of
the of people that don't.
You want to be part of the percentage of people
who do have money in retirement.
And getting started now is all the difference in the
world.
So Ty, walk us through just how much the average
worker should be saving for retirement per year in their
20s and 30s.
Well, it is as much as they possibly can,
right? And so different people are in different situations.
But what I would say is I would start with
10%.
If you can put 10%
of that four O 1K if you have that available
to get the match which is essentially free money compound
interest.
If you don't have the four O 1K available to
we mentioned the Roth,
but at least 10% of your income,
right? I mean you don't you you you want to
pay yourself first,
right. And and so and then put that money in
a place where it's going to grow with compound here.
So a minimum of 10%
more if you can. But again something is always better
than nothing.
It's important to what to get started and as time
goes on
as as you get older and older,
you want to put more and more in those plants
but you have more power of compound interest early.
So what I would say is 10%
of your income is, is a good starting place.
OK good. So how should young people prioritize what can
be a difficult decision,
right, of saving for retirement
versus expenses like paying down debt and saving for a
home?
Great question, great question. And those are the concerns that
that people have.
What is my student debt?
How do I pay that off?
Paying or buying a house,
you have to have a place to live.
It's important to have to grow equity as time goes
on.
So it's a it's a balancing act.
What I would say is if you can buy,
that's better than renting. And
in terms of paying down debt,
it really comes down to what is the interest on
that debt.
If the interest on the debt is 12%,
you want to pay that down as quickly as you
possibly can.
If the interest on the debt,
maybe you have a mortgage at
3.25% and many millennials do
Well, if you want to,
you were to prioritize the savings for retirement at that
point,
keep that that loan because that loan is such at
a low rate.
So it really comes down to what's the interest rate?
Can you make more than the interest rate that you're
paying?
Is there a tax advantage that goes along with that,
the interest rate? And again,
you want to keep it as simple as you can,
but that's something to look at when it comes to
debt and owning a home.
I'm a big proponent of owning a home,
and maybe you do that first before you plan for
retirement.
Maybe you do a little bit of both.
It comes down to your own individual situation.
You know, there's been so much hype around artificial intelligence
since the first use case of ChatGPT,
toward the end of 2022 and so past 15 months
or so.
I mean, you've seen these
tech stocks, especially AI plays like NVIDIA,
absolutely skyrocket, even cryptocurrency this year,
a good gauge of risk appetite in the stock market
definitely took off in the first quarter on the back
of those Bitcoin ETF approvals,
AI stocks, cryptocurrency, are those investments that you would recommend
to people in their retirement portfolios?
The answer is, if you're 20 or 30 years old,
absolutely yes, in moderation. I mean,
do I want 100% of
anybody's portfolio in a cryptocurrency or an AI stock?
No, I I don't. But I would.
I would rather they had the bulk of their money
in a a diversified index mutual fund
and maybe you want 5 or 10%
of your portfolio in those higher risk investments.
I think that's fine, especially if you're 20 or 30
years old.
But as you get older,
closer to retirement, you want less and less of those
things.
But everybody wants to taste the 20 thirty 40%
returns if they can get it.
But you have to understand there is the risk,
the more the return, the Gray the risk and that's
the balancing act.
So we would recommend diversification but a small piece of
those might be fun to own
as so for investors, we know the volatility happens,
right? There's there are many different gauges of volatility in
the stock market.
The VIX is probably the most common one,
but volatility is just part of the nature of stocks
and we've seen a heck of a whole lot of
it out of the past four years
after many years of relative calm.
What would you tell our viewers
if we do run into volatility in stocks as it
pertains to their investments?
Great question. And that's what happened,
that most people have a lot of risk tolerance when
things are going up,
right? They're they're OK with it because they want to
make the money.
Now on the other side of that,
most people are not OK with risk when the market's
going down.
And so it's kind of funny this way.
I say that, but that's,
that's the truth. So as people get older,
as they become more risk averse,
we use a products that allow them to minimize the
risk in their portfolio but still grow their money at
the same time.
Most of our clients are between the ages of about
55 and 75 and essentially what they want is growth
of their money,
but they don't want that very volatility that you're describing.
And what we do for them is we put together
an
investor's guide for them and your viewers can can check
it out
at
tyjayyoung.com. They can get one at no charge if they
have more than
$100,000 to invest. And it shows them how to go
up with the stock market,
lock in their gains on annual basis,
and when the market goes down,
they don't lose anything. And if you're
5565 years old, you want a large portion of your
money protected and growing that that's what we do for
our clients.
That vehicle is called a fixed index annuity by the
way.
And if you're 20 or 30 years old and a
a millennial and you don't want the risk of the
market and you want growth,
it might be right for you as well.
So you can mitigate that risk and still have a
very competitive
reasonable rate of return as time goes on.
You know, something that I think is common is
young people switching jobs, right?
Trying to find places that have the most opportunity for
them,
trying to get a better wage,
certainly trying to take advantage in some cases of what's
been a relatively robust jobs market these past few years.
What are some options or even recommendations that you would
share with our viewers to make sure that their retirement
savings
are still growing and successfully transferring if they are switching
employers?
It's funny you say that,
that we're running into that a lot right now talking
to people that are that have
five or six different 4 O1 KS from different employers
over the last 10 or 15 years or or even
longer.
And because they have five or six different 4 O1
KS at different custodians,
a lot of times they're not really paying attention to
what's happening into those individual accounts.
And if they're not very much money,
sometimes people actually forget where that money actually is.
So and that's the circumstance that we're seeing with people
rolling over,
rolling from job to job to job,
which you know, in this environment that's that's how the
job market works and that's how you move up.
So that's OK. So what do you do?
Well, you've got a couple of choices.
One choice you can you can do is take all
those 401 KS and roll it into your current employers
four O 1K.
That way it's all in one place.
The other option that I like even better is to
take those four O1 KS and roll them over into
an
IRAA self-directed IRA. Inside that self-directed IRA you can buy
anything you want.
Stocks, bonds, mutual funds, index annuities,
cryptocurrency, whatever you want. You have those options,
but it's all in one place,
easy to easy to manage.
And if you change jobs again,
you can roll that 401K from that job into that
IRA.
It's 1 consolidated place to have your money invested in
growing where you can management simple and easy to to
understand.
Simple and easy to to manage.
So the thing we're seeing is a lot of 401
KS.
A lot of places roll them into one IRA.
It makes it simple. And really,
when it comes to investing over a long period of
time,
keeping it simple is so very important.
If you don't want to be staring at your computer
40 hours a week,
most people want to do it and just keep it
simple.
That's the way to do it.
Have it one place, all
right. Tai Young, CEO of Tai Young Wealth Management.
Tai, great to have you on the show,
especially as we start a second quarter.