When I was in my early twenties and got my first "grown-up"
job, working for the State of Texas, I complained to my father about a
deduction from my pay check for "retirement fund." What a waste of
money for something so far off. To me, forty was old. I might not even live long
enough to see retirement.
My father laughed. "Believe it or not," he said.
"You're going to retire some day. It's never too early to start saving for
it."
I was always a saver. But I liked to focus on more immediate
goals.
I only worked for the State of Texas for two years, and when
I quit, because I wasn't vested yet in the retirement plan, they returned all
my contributions to me with my final pay check. I spent the money on graduate
school.
Fortunately, when I was in my thirties and working steadily
again, I began contributing to an Individual Retirement Account (IRA), and once
my company offered a 401k plan, I contributed to that as well.
When you're young, there are so many things to save for. How
do you set your priorities? You want to buy your first home. Maybe start your
own business. Send the kids to college. And oh, yeah, there's saving for retirement.
Some day, but it's a long way off. Plenty of time. These other expenditures
come first. Don't they?
But the earlier you start saving for retirement, the less
painful it has to be. Your money will start growing, working for you behind the
scenes. You've probably seen those pyramids that show how a 25-year-old who
saves $2000 a year until he retires at 65 will have twice as much money in his
account as the person who doesn't start until age 35. Even if the person who
started at 25 stops contributing earlier, he'll still end up with a bigger
balance. Even if the older guy increases his contributions. It doesn't even
matter much how the money is invested, as long as it stays invested (unless,
perhaps, you do something reckless like put it all in your company's stock, and
then the company goes bankrupt).
But what about your children's college educations? Student
loan debt can be crippling.
True. But maybe your children will qualify for scholarships.
Or they can work part-time while they go to school. They might not even want to
go to college.
Or maybe they'll have to take on some debt. At least they
can get a loan for education. You won't have the option of financing your
retirement. There are no "retirement scholarships." You might not be
healthy enough to hold a part-time job, and you might not have the ability to delay
your retirement. Fine, maybe those kids you paid to educate will take care of
you in your golden years.
But do you really want to be a burden to your children? The
best gift you can give them is to provide for your own financial future, so
they don't have to.
Sure those other savings goals are important. Just don't postpone
saving for retirement. Even if you can only spare a few dollars a month—the
cost of a meal out—even if you can only put aside what your company will match,
your efforts will make a big difference later.
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