Hey millennials, plan for your future with 3 easy steps
Millennials are defined by Pew Research as being born between 1981 and 1996 and are now ages 28 to 43. That means most are somewhere in the middle of their career. If that sounds like you, here are some things you can do now to ensure a successful retirement.
1. Understand your retirement plan benefits
You probably know that you’re paying into a retirement plan with an automatic deduction from each paycheck. But do you know if you’ve met the vesting requirements, or how your retirement benefit is calculated, or how to increase your pension income?
By taking the time to get to know your plan, you can make informed decisions about your career and financial future.
Explore your plan:
- Watch a recorded plan webinar or review your plan page.
- Log in to your online account and check for any gaps in your service credit.
- Review who is listed as your beneficiary for your account.
- Find out when you can retire. For most plans you need at least 5-10 years of service before you are vested (or qualify) for a retirement plan.
2. Run retirement estimates
You can use the Benefit Estimator tool in your online account to get an idea of your monthly retirement income.
The best part about this tool is that you can use it at any point in your career. Use it to create an estimate using different factors as many times as you like. It will allow you to see a private preview of what your monthly retirement income could look like.
How to estimate your pension benefit:
- Log in to your online account.
- In the menu bar, select your plan name – such as PERS 2. This will open a dropdown menu.
- Select Benefit Estimator.
- Read how to use the estimator and select Accept & Continue.
- For first-time users, we recommend using the four-step process. This helps you learn how your benefit is calculated.
Social Security estimates
In addition to your pension, you will likely to be eligible to receive money from Social Security. Create an account or log in with the Social Security Administration to review reported earnings and see a projection of your benefit amount.
3. Supplement with Deferred Compensation
In addition to your pension and Social Security income, the Washington state Deferred Compensation Program is an extra source of income for your retirement years. DCP is one of the best ways to take advantage of compound interest. It allows your money to grow faster, because you earn interest on your interest.
Estimate your future DCP balance
Use the DCP calculator to estimate how much you’ll have in retirement with your current contribution. If you don’t know how much you’re currently contributing to DCP, log into your online account.
Example:
If you put $200 per month into a retirement account like DCP, your balance could grow to around $200,000 in about 30 years. The amount you gain will be small at first but get larger over time. That is why it’s so important to start early and make contribution increases regularly.
Here are the gains for a monthly $200 deposit at a 6% rate of return:
- $8,000 of additional earnings over 10 years
- $44,000 of additional earnings over 20 years
- $130,000 of additional earnings over 30 years
Don’t have a DCP account?
If your employer offers Washington’s DCP, you’re eligible to participate. Complete and sign the enrollment form.
If DCP isn’t offered where you work, ask your employer about other retirement savings options.
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