How to stop worrying about retirement — and actually start saving money

Millennials are smarter about money than their parents in lots of ways — in large part because they've had to be. Weighed down by student debt and having lived through the Great Recession at a young age, they're more likely to budget than Baby Boomers and don't expect Social Security to provide for them like it did for previous generations. 

They've even started saving for retirement long before their parents ever did: While Baby Boomers waited until a median age of 35, millennials start socking money away at age 22, according to Wealth Management. 

But here's the problem — even though millennials know they need to plan for retirement, they aren't saving enough. By one estimate, they need to stash as much as 22% of yearly income to have enough for when they stop working.

If you're worried about retirement, it's time to turn those fears into action. Start with these five ultra-simple steps. 

1. Open a retirement savings account — or put more money in an existing one

To get started, open a retirement account. Don't worry if you don't have any money set aside yet to deposit. If you invest in a company-sponsored 401(k), the funds will be deducted automatically from your paycheck before taxes get taken out.

Around 80% of workers have access to an employer 401(k), according to American Benefits Council, so chances are you do. Your company may even have auto-enrolled you. Ask your benefits department contact if you're already enrolled and contributing part of your paycheck. If you're not enrolled, signup. And if you are, find out how to increase your contributions.

Can't get a 401(k) from your job? Consider opening an Individual Retirement Account (IRA) with a bank, brokerage firm or credit union. Check out NerdWallet's list of the Best IRA's for 2017 for ideas on the best places to get one. There are different kinds of IRAs, but a traditional IRA is a safe start.

Good news: If you open an individual retirement account with a brokerage firm, many don't even require an initial contribution.

2. Learn the rules for contributions

If you have a 401(k), find out if your employer matches your contributions. An employer match means if you contribute to your account, your employer does too. That can grow your 10% annual savings rate into a 15% one without costing you an extra dime. 

For 401(k)s, anyone under 50 can contribute up to $18,000 with pre-tax money and for IRAs anyone can contribute up to $5,500 with pre-tax money. Contribution rules are different for IRA's if your income is above $62,000 or $99,000 if you're married.

3. Calculate how much you can save 

Now for the hard part: saving. Ideally, you'd save at least 15% of your income. This may be unrealistic, but it's important to start somewhere. Even 2% is better than nothing.

To figure out how much you can set aside, go through your budget and see how much cash you typically have left after you pay the bills. If you don't have a budget, start with your take-home pay, subtract things you must pay for (rent, utilities, food, et cetera) and see how much is left. 

Don't think you have any money to spare? Chances are you do. Think about non-essentials you can give up easily. Maybe you could eat out one less time a month and put $50 away in an IRA. Or maybe you can save even more by making a few strategic phone calls.

Once you've figured out how much you can contribute, set up automated withdrawals either from your paycheck, for the 401(k), or your bank (for an IRA).

4. Throw "bonus" funds into your IRA

There may be times when you get some extra money you didn't expect, like a fat tax refund, birthday money or a spot bonus at work. Go online to your IRA and immediately transfer "extra" money into the account. 

If you start at age 22 and invest just $10 per week over 45 years, this $10 will turn into $165,776 by age 67, the Motley Fool estimates.  

You can find $10 a week, right?

5. Ramp up your automated contributions 

Once you get used to used to your initial automated contribution, gradually increase the amount. If you were investing 2%, bump it up to 3% after 6 months. Slowly reducing your take-home pay isn't as jarring as suddenly contributing 15% of your income. 

Another trick is to divert any bonuses or raises into your 401(k) or IRA as soon as you get a salary bump. After all, you'll never miss money you didn't have in the first place.

March 8, 2017, 9:02 a.m.: This story has been updated.

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