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Retirement? I’m too young to think about retirement!

Student Career Placement Consultant

A young woman watches a high-speed train go byAccording to recent research, more than half of all American workers haven’t saved anything for retirement. While you may think that this is a problem you can ignore for a few years—or a few decades—the fact of the matter is that if you don’t start saving when you’re young, you’re likely to end up with financial problems later.

It’s human nature to spend what you earn—and in recent years, to spend even more than you earn and carry huge amounts of debt—after which getting caught up on your bills and starting to save is not a likely scenario.

Also, you’re likely to be starting out with more debt than previous generations. About 70% of recent college graduates start their careers with student loans to pay off. According to the U.S. Department of Labor, in 2016 the average amount of those loans was $40,000 per student.

This leaves students with two big problems: Earning enough to (1) pay off their loans and (2) pay living expenses while still saving. I’ve made suggestions elsewhere in this blog about paying off student loans (see, for example, posts about repaying student debt and about income sharing), so in this post I’ll provide some suggestions for how to start saving when you’re just starting out.

The most important thing to do is focus on the process of saving, not the amount you can save. Once you start a saving habit, you’re likely to continue; even if you can only put aside $10 a week, it’s important to make sure you do it.

The next thing to do is to look for ways to economize.  For example:

  • Pack your lunch instead of eating out.
  • Make coffee at home instead of buying coffee from a high-end coffee shop.
  • Exercise at home instead of joining a gym.
  • Shop sales and avoid impulse buying.
  • Pay off credit card balances in full every month to avoid exorbitant interest charges.

Once you have a job, find out if your employer has a retirement savings plan or a pension plan. According to research from the Pew Charitable Trusts, 36% of people who work in the private sector don’t have access to any type of retirement plan, but that means that 64% do! One of the benefits of working in government is that those jobs typically offer some type of retirement plan. Some employers, including governments, will also make contributions to the plan, so the amount you save can grow even faster. Also, the money will be deducted from your paycheck before you see it, making it even easier to save.

Investigate the possibility of opening an Individual Retirement Account (IRA), a Roth IRA, or a myRA—a new type of IRA for individuals without access to a plan at work. An article on the US News site offers a good summary of the different types of IRAs, and there’s a lot of information about the new myRA at myRA.gov.

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