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Spring 2025

Financial Wellness Minute

A guide to maximizing your retirement assets

A A couple reviewing their finances.
Consider this: Only 19% of Gen Z reported putting a percentage of their paycheck into a 401(k).1 With rising costs from inflation, student loans, and debt, many of us are facing the difficult financial decision of how to spend and save our money on a monthly basis. However, the number one regret from those at retirement age is not starting sooner.

Why is this important?

We all know how important saving for retirement is. But when monthly expenses, paying down loans and debt, and life take over, it can be difficult to prioritize saving for retirement. As the newest members of the workforce, almost half of Gen Z (46%) said they are not on track to actively save for retirement in the next five years but want to. This sentiment is common not just among Gen Z, but across all generations. Whether you’re just starting in the workforce or you’ve been in it for decades, it is never too early or too late to start maximizing your retirement assets. With compounded interest, starting your retirement nest egg sooner could make a significant difference in your retirement income. Here are some tips to help you get on track and make retirement savings a priority.

How to get started

1. Know where to start when saving for retirement – Consider using the retirement planning calculator as guide to help replace your income in retirement. Understanding how much you need to contribute to reach your desired retirement income is the first step toward pursuing your goals.

2. Change the way you think about your money – Sometimes, we develop harmful spending habits without even realizing it, which can lead to financial decisions we later question. Our upbringing, culture and societal norms can often influence these habits. By tracking your monthly spending, you can analyze where your money is going and identify areas where you could cut costs, redirecting those savings toward your retirement.

3. Make impulse buying harder – While automating finances is generally a good practice, a low-tech approach works better for discretionary spending. Enter your credit card information for each digital purchase, rather than storing it in an app or online site. Pay with cash instead of credit cards when shopping in person. Additionally, institute a 24-hour cooling-off period before making any purchase.

4. Make a personal finance plan – This helps remove some of the emotion from financial decisions. Start by setting a retirement goal, then track your spending to understand where your money is going. Use that information to create a budget that covers your needs, wants and savings.

5. Create an if/then plan around our goals – We’re more likely to reach our goals if we consider potential diversions — both positive and negative — and plan specific actions to address them. Identify possible roadblocks, such as the holidays or unexpected financial pressures like car repairs, that might disrupt your plan. Decide how you want to respond. For example, you might set a strict budget for holiday spending or reduce dining out when your car needs repairs. This is a journey, and there will be bumps along the way. Acknowledging these challenges will make it easier to stick to your budget and stay focused on your goals.

Dig deeper! Read through How much do you really need to save for retirement.

Quick insights

  • NOTABLE NUMBER

    72

    The Rule of 72 is a simple way to estimate how long it takes for your account balance to double. Divide 72 by your expected rate of return (ROR) to find the number of years needed. Alternatively, divide 72 by your time horizon to determine the annual ROR required to reach your goal. This calculation excludes future contributions.

  • JARGON DECODER

    Longevity Risk

    Advancements in healthcare and medicine have increased life expectancy, making individuals over 85 the fastest-growing age group in the U.S. This brings longevity risk, the possibility of outliving retirement savings, potentially leading to a lower standard of living, reduced care, or post-retirement employment. The Social Security Calculator can help estimate your benefits to supplement retirement income.

SPOTLIGHT: UPCOMING EVENTS
  • Money minutes — Uncomfortable money conversations
    May 9, 12:00 pm ET
    Register
  • Retirement by design — Crafting your vision
    May 9, 3:00 pm ET
    Register
  • Social Security
    May 12, 2:00 pm ET
    Register
  • Student loan survival toolkit
    May 13, 1:00 pm ET
    Register
ASK MERRILL®
  • Question:

    “We’ve saved for our son’s college education, but surprisingly, he may now receive an athletic scholarship when he graduates this year. Meanwhile, our daughter, who will graduate in two years, has minimal savings in her 529 plan, as we anticipated she would receive an academic scholarship. Can you explain how receiving scholarships impacts our 529 distribution options and whether having 529 assets affects the scholarship award?”

  • Answer:

    “Congratulations on your children’s achievements! A 529 plan won’t affect their merit-based scholarships, which are awarded for academics, athletics, or artistic talent. However, for need-based grants or scholarships, 529 assets may slightly reduce the award amount. 529 plans offer flexible distribution options for students with scholarships. You can take qualified withdrawals not covered by the scholarship or take a penalty-free, non-qualified withdrawal up to the same dollar amount as the scholarship, paying income taxes on the earnings. Funds can be saved for post-degree education, transferred to another family member, or converted into a Roth IRA for the beneficiary of the 529, up to $7,000 annually (with a total of up to $35,000). The 529 must have been funded for at least 15 years to qualify. Reviewing your situation with a financial or tax advisor can help you choose which option is best for you.2”

Reserve a spot to ask a Merrill Financial Specialist questions of your own.

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