|
 John Piazza admits he is one of them, although the Chicago-based
banking executive says he has a "decent idea" of his net worth
(assets such as cash and mutual funds minus liabilities like student
and credit card debt). Piazza estimates that about 80 percent of his
friends do not have a handle on their total financial picture.
"It's time-consuming to gather all the disparate information
together initially, and then it's a laborious process to update it
going forward," Piazza says.
While it may be a hassle, not knowing where you stand now makes it
much harder to plan for where you need to be later in life,
especially for retirement, says Kyle Ryan, a certified financial
planner, who is the head of advisory services at Personal Capital.
It is even harder to get a handle on the numbers for those who have
an outsized vision of what they might inherit down the road - which
might dim their motivation to save now. The Personal Capital survey
on retirement readiness found that millennials expect to inherit
about a million dollars, on average.
The average inheritance in the United States is just $177,000
according to a 2013 HSBC survey.
Counting on any kind of windfall, regardless of size, is a risky
business. It certainly does not merit giving up on saving for
retirement - as some 40 percent of millennials respondents did on
Personal Capital's survey by saying they had no retirement plan of
any kind started yet.
Some wealthy families are not even planning on handing down their
fortunes. Big names from Warren Buffet to Bill Gates, to Kiss
rockstar Gene Simmons have all publicly talked about giving the vast
majority of their wealth to charity - not to their kids.
"I've worked with many high-net worth individuals, who behind closed
doors admit openly that they have no intentions of actually leaving
a large sum of money to their children, nor to anyone," says Shannah
Compton Game, a Los Angeles-based certified financial planner who
focuses on millennials. "This can be a rude awakening for a
millennial who has planned on those funds to continue a lifestyle
that they have been living."
Here are three tips on getting your finances on track now instead of
waiting for your retirement fund to be handed to you on a silver
platter:
1. Do the math
The average millennial needs to save upwards of $2 million to live a
somewhat comfortable life in retirement, according to Compton Game.
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Websites can help you figure out the average needs, including
Personal Capital, Bankrate.com (http://bankrate.com) and AARP
(http://bit.ly/20E5Sxk). Or you can talk to a fee-only financial
planner and get specific advice.
2. Have a sit down with your parents
Do not assume you know how much money they have, or that it is going
to you.
"It can be a hard conversation to start, but it's easier than having
an expectation that isn't fulfilled," says Game.
You also have to consider the timeframe involved and factor in the
uncertainty. Typical millennials in their 20s today would have
parents who are a long way from retirement and, perhaps, 50 years
from dying.
3. Save more
Even if your parents do intend to leave you an inheritance, saving
money should still be your top priority. Build a solid emergency
fund that can cover three-to-six months of expenses in a high-yield
checking account. And contribute to some kind of retirement plan;
even if your employer does not offer a 401(k) there are options for
IRAs.
If you started contributing $100 a month at age 25 to a traditional
IRA, and got a very modest 4 percent return, you would have more
than $118,592 before taxes if you retired at age 65 based on
Bankrate.com's retirement calculator.
(The author is a Reuters contributor. The opinions expressed are her
own.)
(Editing by Beth Pinsker, Lauren Young and Andrew Hay)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
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