College Connect: Saving for retirement, starting NOW

By Molly Stawinoga

I’m 19 years old, which means I’m about 42.7 years away from retirement (assuming I retire at the U.S. average retirement age of 61.7, according to the United States Office of Personnel Management). Now, in my day-to-day life I cannot even choose what my next-day outfit will be. So why in the world would I start planning for retirement now, when I’m just trying to live a fun college life?

Because my money now will gradually accumulate interest over time – meaning I’ll have even more money in the future. Albert B. Crenshaw from the Washington Post says it’s never too soon to start planning for retirement.

“A key element of investment success is time. The best way to build assets is to harness the power of compounding, and that power grows with every year it is allowed to operate,” Crenshaw said.

Understandably, saving for retirement can be hard at this age, if not nearly impossible. I’m attending the University of Missouri for around $10,000 each semester (and that’s what is coming out of pocket AFTER scholarships are applied). Starting in May I’ll also be paying rent and utility bills each month.

All of those obstacles standing, I still am managing to contribute 8 percent of my bi-weekly paychecks to a 401 (k). My employer matches a certain percentage of that to contribute to my retirement savings. I obviously don’t have a sustainable amount of money in there yet, but it grows with each paycheck. And along with that, it compounds.

According to Investopedia, “Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.”

So basically, the earlier you start saving, the more money you make by doing nothing. Sounds nice, right? But what if you don’t work at a job that provides a 401 (k), as college students often don’t? You’re in luck, because a 401 (k) isn’t the only way you can invest in your future!

Roth IRA accounts are becoming one of the most popular retirement saving accounts, especially within millennials (that’s you!). Virtually any person can create one, and they have several benefits including:

  • No income taxes are withheld when you withdraw funds from accounts at least five years old (and contributions will never be taxed)
  • You can withdraw up to $10,000 of your earnings without a penalty, no matter what age, when buying your first home (as long as you wait the five years for the account to age)
  • You can often get the account for FREE!
  • You can invest money in your account to really anything
  • You will be earning money from the money you put in just sitting there. That’s so much better than if the money were just sitting in your checking account doing nothing!

If you start saving now, your money in either a 401 (k), Roth IRA or another retirement savings account could amount to well over $1 million. While this may feel like an eon away from the stage of life you are living in now, if you don’t start saving soon you simply won’t have enough to pay for the necessary (and leisurely!) things later in life without working.

So, for your sake along with that of your future family’s, please start saving. Break the current statistic that only one-fourth of working-age millennials are using an employer-sponsored retirement plan, or join the growing popularity and start a Roth IRA.

Note to self: The future YOU will thank you.

Molly Stawinoga is a sophomore at the University of Missouri.

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