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Those financial commercials that show the millennials sitting in their lush homes
planning for their retirement seem so fake and out of touch. Most new college
graduates are still in an apartment, trying to find a job or learning to fit into a
new corporation. Retirement planning seems futile. However, taking time to
think about what you want your retirement years to look like is an important step
to transition from college to career. Below is some information to help you
navigate the different financial planning and retirement terms and opportunities
that may be available to you as a new employee.
Start Now
At some point in your academic career, you learned about calculating
compound interest. Just in case you forgot, there are financial calculators
online that can do the calculation for you! The most important concept for you
to know is that saving for retirement as soon as you get your first job will yield
huge gains. Let’s look at this example.
Two employees begin work at the same company at the same time. Pat
chooses to contribute $100 every month. He begins this deduction from his very
first paycheck. He starts this saving at the age of 25 and he wants to retire at 65,
thus giving him 40 years to contribute to his savings before retiring. For the sake
of the example, Pat’s contribution will remain the same, at $100 a month, for
forty years. His colleague, Julie, decides not to begin setting aside money for
her retirement when she first starts working. Unlike Pat, Julie waits until five years
later to start saving. At age 30, She contributes the same amount, $100 each
month, but now she only has 35 years instead of 40 to save her money. Lets see
what difference those five years will make when they retire.
At 65, Pat will have just over $310,000 while Julie will have only
$206,000. Due to the impact of interest on the money they
are saving, the five-year’s difference, cost Julie over $100,000
in her retirement. Wow!
Section 18 – Planning For Your Future
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