What Millennials Should Do to Combat the Fear of Running Out of Money

Sixty-six percent of millennials fear running out of money more than death, according to a study from the Allianz Center for the Future of Retirement. And millennials are hardly alone in this fear. Seventy percent of Gen Xers and 61% of baby boomers are more scared of running out of money than death.

Key Takeaways

• Two-thirds of millennials fear of running out of money more than death.
• To mitigate this fear, it’s important to establish some smart financial strategies, such as delaying Social Security until age 70 and diversifying investments.
• Having a budget, being savvy about spending, and stashing retirement savings in a Roth IRA are other ways that millennials can fight the fear of running out of money.

What Can You Do To Minimize the Fear of Running Out of Money?

Survey respondent blamed high inflation, high taxes, Social Security not offering enough financial support, and market volatility for their worries about running out of money.

These are some strategies experts recommend to help ensure you have enough money for retirement.

Delaying Social Security Benefits

One way to maximize money in retirement is to delay Social Security benefits.

“Delaying Social Security can significantly boost your monthly income, and waiting until age 70 can increase your benefit by 8% per year beyond full retirement age, which is 67 for most people,” says Priya Malani, founder of Stash Wealth. “Your benefits are adjusted annually for inflation through COLA (cost-of-living adjustments), which helps preserve your purchasing power over time.”

Diversifying Retirement Savings

To start, millennials will want to invest a good share of their savings in the stock market to take advantage of the power of compounding returns on their investments.

“For anyone afraid of running out of money, the most powerful thing you can do is focus on your own savings rate and getting a healthy portion of the money you save invested into long-term growth assets,” said Eric Roberge, a certified financial planner (CFP) and founder of Beyond Your Hammock.

Next, millennials will want to diversify their investments. This will help them stay on track with their investing goals, such as retirement.

“By spreading your money across different asset classes, industries, and even parts of the world, you’re not putting all your eggs in one basket. So when one area of the market dips, other areas can help cushion the blow,” Malani said.

Budgeting and Spending Wisely

Establish a budget and stick to it, making room for items such as emergency savings and long-term goals such as saving for retirement.

“Maintain an emergency fund or some kind of cash reserve that you can easily access,” Roberge said. “Keep expenses much lower than you could technically afford, and create a gap between what you earn and what you spend.”

Save Aggressively for the Future

“Save more than you think you need. Invest 20 to 25% of your gross income to meet your long-term financial goals like retirement,” Roberge said.

Utilization of Tax Strategies

A Roth individual retirement account is a good place for millennials’ retirement savings.

“A Roth IRA is one of the smartest tools millennials can use to build long-term, tax-free wealth, especially while you’re still in a relatively lower tax bracket,” Malani says. “With a Roth, you pay taxes now, your money grows tax-free, and you withdraw it tax-free in retirement. That’s a huge win, especially considering tax rates in the future are anyone’s guess.”

The Bottom Line

Many millennials fear running out of money, as do many Gen Xers and baby boomers. Taking a proactive approach with finances is the best way to fight the fear of running out of money.

Start by being wise about budgeting, spending, and saving. Next, consider the tax advantages of a Roth IRA and invest some of your retirement savings in these accounts. Diversify your investments and consider waiting until age 70 to claim Social Security benefits.