last thing many young people want to do with their
paychecks is sacrifice part of them for a retirement
account, even though tiny contributions made at an early
age are all but guaranteed to multiply many times as the
years go by.
they’re saving for anything, it might be a trip or
some short-term objective. But typically socking money
away for a retirement that’s decades away isn’t high
on the list of goals," said Lynnette Khalfani Cox,
founder of the Mountainside, N.J.-based website
people in their 20s or 30s, the priorities may be paying
rent, making car payments and managing debt related to
student loans. But it’s never too early to start
financial adviser Seth Dresbold illustrates the power of
compound interest by assuming a person were to invest
$5,000 a year between the ages of 25 to 35 at 8 percent
interest. That individual could expect to have $615,580
at age 60, having invested only $55,000.
interest rates will have affect bonds for the
foreseeable future. Bond exchange-traded funds carry
more risk than individual bonds. They trade like stocks,
and investors can lose principal.
that same individual instead started investing $5,000 a
year every year beginning at the age of 35, and
continuing until the age of 60, he or she would expect
to have $431,754 at age 60, despite having invested a
total of $130,000," said Dresbold, a senior adviser
and partner at Signature Financial Planning.
by starting later," he said, "you would have
$183,826 less despite investing $75,000 more."
the stock market rarely hits 8 percent on an annual
basis, historically speaking, the market has returned an
average 8 percent per year since the 1920s. Last year,
the Standard & Poor’s 500-stock index was up 12.25
percent, Dresbold said.
biggest mistake millennials make is they focus too much
on money and not enough on the time," said Aaron
Leaman, Dresbold’s partner at Signature Financial.
"They think about their student debt and paying
rent. They care only about the money and they miss the
aspect of the time.
if you just put away $20 a month, if you’ve got 30
years until retirement, it compounds and it grows so
much more by the time you retire."
debt can be a little distracting, of course. The typical
college graduate from the class of 2016 owes $37,172,
according to Mark Kantrowitz, publisher of Chicago-based
Cappex.com, a website about college admission and
debt has nearly doubled since 10 years ago, Kantrowitz
said. The graduating class of 2006 left college with an
average debt of $20,790.
also value experiences over things, Cox said, which is
why so many make travel and time spent with friends and
family a priority.
to a Bank of America Merrill Edge study published in
May, today’s 18- to 34-year-olds are much more likely
to prioritize travel, dining and their gym membership
over their financial futures. The study of more than
1,000 relatively affluent individuals found that 81
percent of millennials were more likely to spend on
travel, 65 percent on dining, and 55 percent on fitness,
issue, of course, is that some of them get stuck in a
pattern where they’re constantly telling themselves
‘You only live once,’" Cox said. "With
that mindset, it’s hard to be future-oriented because
saving for retirement requires an awareness of the need
for delayed gratification and a willingness to act on
money takes discipline and for those having trouble with
that, Dresbold suggests making it automatic through
payroll deduction, especially when employers offer a
tax-deferred money," he said. "You don’t
have to think about it as much. Oftentimes when the
money gets into your checking account that money is
spent somewhere. You can prevent that from ever going
into the checking account and directing it into savings.
Payroll deduction just makes it a lot easier for that to