The Moore American

March 20, 2013

Youth should start saving early to lock in retirement at 65

By Brenda Hill
The Moore American

MOORE — Fewer and fewer of us expect to retire at 65. However, there is still hope for those in their 20s and 30s to pull it off.

It’s hard to convince young people to start saving for retirement. It’s boring, especially if it seems like they won’t need the money until some point in the far off future. But the earlier they start saving, the better.

Saving as much as you can, as early as you can allows the principal of compounding to really work in your favor. For example, a 22 year old recent graduate signs up for her company’s 401 (k) plan and has $250 a month taken out of her check until full retirement age of 67.

If her savings are invested at 6 percent, she will have saved $689,000 over the course of her 45-year career. If she is more aggressive, puts a little more money in stocks and earns 8 percent, the amount grows to $1,318,635 over the same time span.

Here’s the bottom line for all of us, especially younger workers: The longer you wait to start saving for your retirement, the more you will need to set aside each month and the more risks you will have to take with your money.

Having a retirement nest egg will put you in a better position to deal with unknowns such as periods of unemployment, career changes, new business opportunities, health concerns and forced early retirement.

Besides having regular contributions taken directly out of your paycheck or bank account, increase your retirement contributions whenever you get a raise or some unexpected cash such as a tax refund.

It also is important to become a disciplined money manager. Even if someone is a good saver, that doesn’t necessarily make them a good spender. Being frugal is “in” now, so it’s a great time in a young person’s life to create a spending plan.

In addition to being disciplined with your money, keep your debt under control. The less debt you have to pay off near your preferred retirement age, the more control you have when you retire.

It is a good idea to take some risk — both in terms of investing enough of your retirement portfolio in stocks to beat inflations, and thinking creatively about your career. For instance, think about whether your current skill set and college degree can be applied in a field you have not ever considered.

Finally, keep your job skills sharp and up to date as technology and trends change. Doing so could put you in a better position to move into a higher paying role when the opportunity arises.

This also could allow you to transition earlier into a retirement career such as consulting. Having enough saved and current skills gives you the flexibility to plan your exit from the 9 to 5 job. This may even include working only-part time or volunteering.