For young people starting their first jobs, financial concerns are many. Using their first salaries to invest in retirement is not typically what’s on the mind of recent graduates – but it should be, said Bill Wolf, a financial adviser at Iola’s Edward Jones office.
“Starting early is key,” Wolf said.
Despite a volatile market, putting money into an individual retirement account (IRA), 401(k) or any other growth fund sooner than later ensures positive returns over a long period of time, Wolf said. And current market levels make now an even better time to start.
While the parents and grandparents of people in their 20s and 30s might be upset to see a 5 percent drop in their portfolio during a down year or two, Wolf said a 25-year-old has time to let the down years occur because the odds of seeing positive returns during a 30- or 40-year investment span are more likely.
“Emotions get in the way,” Wolf said. “If you leave your investments alone, you almost always see good growth.”
For 23-year-old Iolan Chris Weiner, saving for retirement hasn’t begun yet. Instead, he says he’s too busy worrying about student loans and making money.
“Knowing my career path, I’m not too worried about having enough money to retire with,” said Weiner, a Thrive Allen County employee. “If I didn’t go to college, I would be much more concerned with putting 10 percent of what I make away right now.”
But, Wolf said, it doesn’t matter what situation someone is in. Every day a potential investor waits, costs him money in the long run.
No small potatoes. For perspective, if a 35-year-old using the same investment vehicle returning an average of 10 percent each plans to have $500,000 in a retirement fund by the time he is 65, he would need to save $2,650 more per year than someone starting at age 25. Someone who starts at 45 would have to save $158,000 more than the 25-year-old in order to have the same $500,000 for retirement.
For now, Weiner said he’s putting money in a checking account as opposed to a savings because the checking generates more interest.
“What’s the point of having a savings account if it doesn’t do me any good,” he said. “It’s all about spending your money wisely.”
But human nature is to spend, Wolf said.
“To save money, you have to hide it from yourself,” he said. “If you can feel and see it, it’s probably going to find a new home.”
Weiner’s reluctance to dive into investments is shared by many, Wolf said.
“People that age just don’t think about it. Retirement is a long ways away,” he said, adding that the mentality is a result of being young, not a result of a specific generation. “It’s not something that’s in the front of their minds.”
Iolan Ashley Nellic, 27, had money in savings and a 401(k) plan through her last job in Kansas City, Mo. but since losing it in February, she’s been struggling just to get by, let alone think about 30 or 40 years down the line.
“I try not to think about retirement because you have to work before you can retire,” she said. “I’m more worried about having money next month than I am about having money in 2042.”
Though not having a stable career does hinder investing, it doesn’t prohibit it.
Since graduating from Kansas State University with a degree in chemical engineering, Iola native Ben Clubine has struggled to find full-time employment. Despite the hurdle, the future and eventual retirement haven’t escaped Clubine or his wife’s notice.
“I’ve actually started an IRA and I put a small portion each pay period in it,” he said. “That’s a good way to get used to a habit of saving. We are young, and we have time on our side, but I think it’s important to look ahead.”
His wife also invests in a 401(K) plan.
Clubine, Weiner, Nellic and Wolf all have different perspectives on when and how to invest, however, they all share the same thoughts about Social Security – don’t count on it.
“Social Security probably is going to go bankrupt. I’m not counting on it and that’s the way I think my generation should look at it,” Clubine said. “If you don’t and it dries up, you’ll be in a sorry situation.”
Weiner agreed.
“We’re paying into it and we’re not going to get any return,” he said.
Although the future of the benefits program is uncertain, it shouldn’t impact someone’s outlook on retirement, Wolf said.
“Social Security was never intended to be a full retirement plan,” he said. “It was a supplement.”
Despite the ever-changing world and all the fluidity in it, the one constant is market norms, Wolf said.
“Things don’t change that much,” he said.
With retirement decades away, young people lack motivation to saveâ¨
