One of the more interesting bits of data to come to my attention recently is the implication that young professionals are confident about their chances for a comfortable retirement.
State Street Global Advisors released the results of a survey that indicate that 82% of those under the age of 25 are “somewhat” or “very” confident that they have enough for retirement.
This is a stark contrast with those who are older, who are much less sanguine about their own chances of outliving their money.
Are Young Professionals TOO Confident?
The same survey that seems to imply that some members of Gen Y  are very confident about outliving their money, though, indicates that those under 25 also have a much higher cash-out rates on their retirement plans than the general population (27% vs. 11%).
What this tells me is that young professionals might be optimistic about the future, but unless they get serious about their retirement planning now, they will be just as unsure as the rest of us when they get older.
Retirement looks like a long way off for someone who is under 25. After all, if you plan to retire at age 55, that’s 30 years. To someone that young, 30 years is an eternity. Even if withdraw money from your retirement account now, you’ll have plenty of time to make up for it later (so you tell yourself).
How to Ensure that You Outlive Your Money
If you want to outlive your money, you need to start planning now. The earlier you plan for retirement, the better off you’ll be. Here are some of the things you should be paying attention to right now, if you really want to outlive your money:
- Invest early and invest often: The earlier you begin investing , the better off you’ll be. Even starting just five years earlier can mean tens of thousands — or even hundreds of thousands — of dollars more in your retirement account. If you want to build your nest egg, you need to be in the habit of investing as much as you can, as soon as you can.
- Asset allocation: Your asset allocation matters. Make sure that you have a portfolio that is properly diversified for your age and risk tolerance. Don’t forget to periodically rebalance your portfolio  so that you stop drift in your assets. Once or twice a year, look at your retirement savings, and make necessary adjustments.
- Be conservative in your projections: When you decide how much money you need to retire , and how much you should set aside to make that happen, keep the estimates conservative. Many are still insisting that you estimate 10% annualized returns for equities. You might be unpleasantly surprised if you use that guideline. Instead, go conservative. Assume 6% or 7%, and plan accordingly. It means setting aside more money now, but it will more than likely mean a more comfortable retirement in the future.
- Don’t assume the 4% rule will work: If you want to outlive your money later, don’t assume you’ll be able to withdraw 4% each year. The new realities of the market are showing that this rule of thumb may not work.
Now is the time to prepare for your future. Don’t assume you’ll have more time tomorrow. Tomorrow has a tendency to slip away.
(Photo: Tax Credits )