As a millennial, I'm scared I'll never be able to retire, but financial planners say 4 strategic steps will get me there

By Jen Glantz

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I'm very self-conscious about how far behind I feel I am when it comes to planning for retirement. I started taking retirement seriously after I turned 30. When I decided to get moving on planning for retirement, it was a slow process where I contributed just a little bit every month to my SEP IRA, which only added up to less than a few thousand every year.

When I talked with friends about their retirement accounts, I heard stories of how they've been putting money away since their early 20s or had companies that matched their 401(k) contributions, so they had a good chunk of cash inside their retirement accounts. It made me wonder if I could ever catch up to them, or worse, would I ever have enough saved to be able to retire?

That's why I decided to talk to some financial advisors for tips on how to make sure I'm on track. Here's what I learned. 

1. Plan out what your retirement might look like

I've never truly sat down and planned out what my retirement goals look like. I just started to slowly put money into a SEP IRA. Without goals, it's hard to track progress.

Anthony Watson, a financial planner, says that it's important to understand your values and ideal retirement vision, and then translate that into financial goals. Once you've done that, says Watson, "quantify the gap that may exist between the resources you have determined you will need and the resources you currently have. This can be done with a financial advisor's help or by modeling through any number of retirement calculators available online."

2. Track your 'Financial Independence Ratio'

When I started to really look into the progress of my retirement savings, I had no idea how to measure how well I was doing or even if I was on track to retire in 30 or so years.

Financial planner Curtis Bailey recommends tracking something called the Financial Independence Ratio (FIR) so you can view your progress. 

"The FIR looks at assets for retirement divided by the targeted amount needed for retirement. The FIR ratio gives you a percent funded. As a starting point, take your assets excluding your home, 529s, and any other assets that you are unlikely to sell/use for retirement. A quick calculation for the targeted amount for retirement is to take your salary then subtract off savings and finally divide by 4%.

Even though figuring out a FIR is hard for me to do now (since I don't have many assets or even a clear target amount needed for retirement) keeping this in mind for the future will be helpful.

3. Track your investment returns

Another way to track your retirement progress, according to Bailey, is to track your investment returns relative to your financial plan return assumptions.

"The point for retirement planning is not whether the portfolio has outperformed a random basket of stocks and bonds, but rather have the returns moved you closer or further away from retirement. If you've been able to outpace your financial plan return assumptions, that means you're ahead of the game. You might be able to retire earlier. If you're behind, that might mean more savings or retiring later."

This advice prompted me to start doing monthly checks on my retirement portfolio so that I can track performance and make decisions on whether or not I should increase my savings rate.

4. Consider other sources of retirement income

I feel like I'm constantly trying to catch up in terms of contributions to my retirement account and I haven't even spent time thinking about other potential sources of retirement income. 

Financial planner Cody Garrett recommends determining your possible sources of retirement income that are both in and out of your control. 

"These may include Social Security, public or private pensions, retirement plan distributions, investment dividend and interest distributions, and other passive income sources," says Garrett.

While I can't plan for Social Security income and won't have pensions, it made me think about my overall investment dividend strategy and even future passive income sources I can start working towards, such as rental property income, in future years.