Save Early and Often

p>If I am insane for encouraging young people to think about retirement, then I am in good company. The Wall Street Journal ran an

ticle this weekend on how college graduates can save even while paying off student loans. Nest eggs are not made overnight, so It”s really never too early to think about retirement. Also, keep this in mind when starting work at a job that offers a tax-deferred retirement plan, espcially if the company matches contributions. Many young workers do not participate in employer-sponsored retirement plans because they feel they don”t have enough money to contribute, or it is not worthwhile if they do not plan on being at the particular job for a long time. 401(k) plans can be rolled over if you move from one job to another so there is no reason not

to take advantage of them.


Comments (2)

Trackback URL | Comments RSS Feed

  1. Jack Towarnicky says:

    Pam, thanks for the post.

    Based on 30+ years experience, I believe you are mostly wasting time by marketing the 401(k) as a retirement savings plan to younger workers. In 1996, when we redid all of our communications, I removed every mention of “retirement” and substituted pictures and descriptions encouraging workers to “drive to their dreams”. The older workers knew what the plan was for – so, no one needed to mention retirement.

    Studies, such as the annual one performed by the American Payroll Association, show that 70% or so of Americans live paycheck to paycheck. Many are solely focused on near term needs and wants, or in reducing their accumulated debts.

    I have found the most successful option to increase participation and savings rates among younger workers (also lower income, female, minority, etc.) are automatic features. Next most effective would be a plan design that ensures they can access those monies without leakage. that is, the plan would use 21st century loan functionality, coupled with commitment bonds (commit to repay the loan), where the participant would use loans (no in-service, hardship withdrawals available) – even loans that would be initiated after separation from service (participation survives service with that specific employer). No need for rollovers – because that vehicle only offers access via taxable distributions.

    Our goal should be to do what is needed to ensure younger workers save when first eligible and save more than they believe they can afford to earmark for retirement. That is, the best strategy would have them save to meet all financial needs, get any company match, invest, accumulate, borrow when needed, continue to contribute and get the match, repay the loan, rebuild the account for a future, larger need. Save, match, invest, accumulate, borrow, continue saving, repay the loan. Repeat as needed up to or through retirement.

  2. Kyle says:

    I think that your illustration is not caellispey useful.The average pot that is a352k which would give an income of a33200 or a32600 if you are about to retire. The average salary is a326000, or even if you were lucky enough to be in the top 25% of earners, you are earning just under a332,000.the idea of putting away another a310 rather than a31000 per month into a pension is very unrealistic in this current situation.If you manage to retire at 60 then you will have no one to play glof with as your friends will be working for another seven years at least.We also need to be very careful where we put our savings for our retirement, so many pension funds have been lost or looted, so you may find that your fund is less than you thought, or even less than you put in, and what that fund buys you is less than you thought.We need to put more emphasis on spending less now, saving it and investing it in many different ways and needing less in our retirement by sharing resources and costs.