Retirement and Staying on Track After College

Why Aren’t We Saving For Retirement?

According to an article on yahoo.com, “A recent survey by Hewitt Associates found that almost 70 percent of Generation Y workers (those 18 to 25 years old) don’t bother to contribute.”

This seemed to startle me since I am right on the cusp of Gen X/Gen Y. I cannot even imagine what people in this generation can be thinking. But then it has dawned on me: they don’t have a choice.

With the costs of student loans being as they are, starting salaries in all but the most up and coming metropolitan areas are quite low compared to what they were just a few years ago. That was when those of us at the middle and end of Generation X were graduating and snatching up most of the remaining, good-paying jobs. And finally, even more importantly, there is just plain old inflation, with increased rates.

For many people though, there is still this issue: the desire to become the owner of the latest gadget, car, or go on a great vacation. However, this is not everyone, including college grads.

But what is the signal that we are sending our youth in this country if we do not even provide them a means to get out of school and start their lives?

First off, I don’t think that we are quite there yet. There’s still money to be made by smart, hard-working graduates.

Second, I think that it is silly to think that the same advice is going to work for everyone, generation after generation. Generation Y graduates will have to adapt to their financial environment. However, based on my own experiences, I can think of three ideas that the Gen-Y’ers should be thinking about:

1. Save Money on Where To Live:

One idea that I think should strongly be considered by those graduating from college is the idea of moving home. If you have parents who you can live with comfortably and work at your first job, then consider it. Consider paying rent in the form of chores, errands or a smaller amount each week/month to show good faith to your parents and keep you motivated.

For those not able to live at home, for one reason or another, consider getting an apartment with roommates. Too often, it is considered to be a bit of a lower standard of living for people who are young to have roommates, but this is a complete misconception. In the age before you are working at a high-profile career and are not attached to a boyfriend or girlfriend, it can be an amazing time to room with friends or even meet new people that way. There will be challenges; that is certain. But, in the scheme of things, the skills you likely learned in college are going to make your roommate situation much better.

2. Avoid Credit Cards:

It sounds a bit basic, but avoid credit cards. If you have them already, start a plan toward paying off your debt. It is likely a high interest credit card should be your first target. Consider working an extra part-time job and making that money solely for paying off your debt. There are some (probably very few) acceptable uses of credit cards. Overall, there needs to be a plan to tackle this debt. I wish I had started doing this sooner. The dinners that I ate and stuff I bought is long gone, but the debt remains. Using these cards were not a great choice on my part.

3. Tackle Student Loans Soon:

If you have no credit cards, you will likely want to consider paying a small additional amount on your student loan each month — especially if it is a loan that lasts more than 10 years. Even 10 or 20 dollars monthly will save you a large sum of money in interest, not to mention decrease the length of the loan and likely improve your debt to income ratio. All of these are components of having great credit score. In the long term, that score can set you up nicely to buy a house or condo later on.

Getting To Retirement

Once you’ve begun to tackle your debt in this way, you will likely start to see some additional money available for retirement. Start as soon as you can, and put as much as you can. In most cases, the early start you could get will be worth much more than any additional amount you could put in later.

When I started, I only put in 5% for my retirement when I definitely could have afforded more. It is definitely worth considering putting in more sooner. In fact, in a perfect world, you would put in the most early on and then put less and less as you grow older so that compound interest makes your money work hardest for you.