Will Millennials ever be able to retire?

Millennials now the largest living generation
Millennials now the largest living generation

I'm in my late 20s and earn a modest salary. It's hard to save, so I don't see how I'll ever be able to retire. Is there a way to prepare for retirement if you don't earn a big salary? Or am I just going to have to work until I die? --Mike, North Carolina

Planning and saving for retirement is a challenge for almost everyone these days. But if you're just embarking on your career and not pulling down the big bucks, preparing for retirement can be even more daunting as there are so many competing demands chipping away at a slim salary: housing costs, transportation, basic living expenses and, for many people in their 20s and 30s, college debt, which a recent poll by the American Institute of Certified Public Accounts found is major reason many people postpone saving for retirement.

Related: Are you behind on retirement savings?

But daunting doesn't mean impossible. Granted, there are no guarantees you'll be able to build an adequate nest egg during your career, even if your earning power improves as you age. But if you build a solid financial foundation and exercise some tenacity and discipline over the years, you can certainly improve your chances. Here are three important things you should do:

1. Develop responsible money habits from the get-go. When I say responsible money habits, I'm not talking about saving a few bucks here or there by skipping lattes or other small indulgences. Rather, I'm talking about the big picture -- namely, adopting an overall lifestyle that allows you to live below your means.

That may seem antiquated in today's immediate-gratification world. But if you spend every cent of your paycheck just to support yourself, you won't be able to set aside dough for the inevitable curve balls life throws our way -- job losses, medical emergencies, unanticipated expenses -- or for your eventual retirement.

For example, the Department of Labor's Consumer Expenditures Survey shows that housing is the single biggest expense for households young and old. So the less you have to shell out to cover this major dent to your paycheck each month -- even if it means settling for digs in a lower-cost city or the less fashionable part of town, sharing quarters with friends or even moving back in with your parents for a while (assuming they're willing) -- the more financial wiggle room you'll have and the more you'll be able to sock away some dough for retirement.

Related: Can't afford to save? Stop doing this

The same goes for another major expense: transportation. There are plenty of affordable-but-dependable used cars around, so there's little need to spring for something flashy and new. If you can get by on public transportation and the occasional Uber ride, so much the better.

It's also crucial to develop good habits early on when it comes to credit, especially credit cards. The obvious reason is that financing your lifestyle with plastic can get expensive, with interest rates often exceeding 15% a year. But there's a less obvious reason too. Research shows that we almost feel as if we're using Monopoly money when we don't pay with cash, which can lead to overspending.

That's not to say you should go old-school and deal only in cash. But if you're going to rely on the convenience of credit cards or apps, don't fall into the trap of believing that you can afford to buy something just because you can flash a card or wave your iPhone.

2. Start saving ASAP, even if it's a pittance. It would be nice if from our first job to our last we could all set aside 15% of salary a year, the amount a Boston College Center For Retirement Research study estimated the typical household needs to save for retirement. But for many people, especially those just starting out, that's unrealistic. Extreme situations aside, however, most people should be able to manage to save at least something on a regular basis, whether it's 1% of pay, 5%, $50 a month, whatever.

Getting that early start, even with a modest amount, is crucial, since establishing the discipline of regular saving in your 20s or 30s makes it more likely you'll continue that regimen in your 40s and 50s when you're earning more and can likely afford to save more.

Come retirement time, the payoff to getting started right away -- even if you begin with a relatively small amount -- can be substantial. For example, a 25-year-old who earns $35,000 a year, receives 2% annual raises, starts out saving just 5% of pay and increases that amount by one percentage point each year until he maxes out at 15% of income at age 35 would end up with more than $900,000 at 65, assuming he sticks to that savings regimen and earns a 6% annual return.

Calculator: How fast will my savings grow

If you can do this regular saving by signing up for a 401(k) plan where your tax-deductible contributions are automatically deducted from your paycheck and the employer may also offer matching funds, so much the better. If that's not possible, consider opening a traditional or Roth IRA (Morningstar's IRA calculator can help you decide which is better) with a mutual fund company through an automatic investing plan that transfers a given amount from your checking to your IRA account each month. The point, though, is to put your savings on autopilot, as you'll be more likely to save than if have to make a conscious decision to do so each month.

3. Get the most out of the money you do manage to put away. The implicit message from the investment industry is that to succeed as an investor you've got to watch the financial markets like the proverbial hawk and be ready to nimbly duck in and out of different sectors at a moment's notice to avoid setbacks and maximize gains. That's self-serving nonsense.

In fact, there's an easier and surer way for you to turn the money you save each month into a sizable nest egg. Simply invest your retirement savings in a broadly diversified mix of stock and bond funds that jibes with your tolerance for risk. For people in their 20s and 30s, that will likely mean investing 70% to 90% of savings in stock funds, but you can arrive at a stocks-bonds blend that's appropriate for you by checking out this risk tolerance-asset allocation tool. Once you've settled on a mix, stick with it, except to rebalance occasionally.

Asset allocation: Fix my mix

After you've decided how to divvy up your savings between stock and bond funds, do all you can to avoid squandering your investments' returns on bloated investment fees. Paying 1% a year in investments costs may not seem like a big deal. But a recent NerdWallet study showed that over the course of a 40-year career paying 1% annually in fees could in some cases cost Millennials more than half a million dollars in sacrificed returns.

The best way to avoid the drag of fees -- especially given a recent McKinsey forecast for lower investment returns in the years ahead -- is to stash your retirement savings as much as possible in low-cost index funds and ETFs, many of which charge 0.20% or less annually.

If you feel you need help building an investment portfolio, consider going with a low-cost alternative such as an online robo-adviser or Vanguard's Personal Advisor Services, which combines technology with access to a flesh-and-blood financial adviser.

Are there other things you can do to reduce the odds that you'll have to, as you say, work until you die? Sure. But the three suggestions above are the biggies. If you start with them and stick to them as best you can throughout your career, you can at least be confident that you'll be heading in the right direction toward a secure retirement.

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