“Where were you when I was 20?”

This is a question that comes up at virtually every enrollment meeting. People have that “what if” moment, realizing that if only they had started planning for retirement when they were 20, it could have made a much larger impact on their financial security as they near retirement. I have a daughter who will graduate from college in the next year and I want her to remember that I was there when she was 20. So let’s start the conversation about retirement savings in our 20’s.

One of the highlights of my job are the days when I have the opportunity to have a conversation with a young employee who perhaps isn’t so weighed down financially by life ( mortgages, marriage, raising kids, revolving debt, etc.). That participant is at a very important crossroad in life. Right now they have the opportunity to define when they will retire. They are enrolling in the employer’s retirement plan with the match contributed by the employer and may still have the money in their wallet to be able to contribute, 5%, 10% or maybe even 15% of their pre-tax pay. They may even want to put their money in post-tax via a ROTH contribution. The sky is blue, there is not a cloud to be seen and the retirement possibilities are endless.

I feel a very strong responsibility to young employees when we talk. Most of them do not understand why they should save money, only that they have heard others talk about it, so here they are. Most young people have been conditioned to think that saving for retirement is something you do in your 40’s. NO, NO, NO, by then we are way behind the curve. They are a captive audience for the next hour, so what do I want them to know when they walk away from the meeting?

  1. Do not depend on Social Security to help fund retirement.
  2. You need a goal, to replace a minimum of 70% of their income when you retire.
  3. To hit that goal over the course of your working life you need to save 10-15% of your income each year, not counting your employer match (and get every bit of match that your employer is offering).
  4. Use an investment vehicle that helps make decisions for you and keeps you on track to achieving your retirement goal.
  5. Every time you get a raise, promotion or cost of living adjustment, take some of it home, but not all of it. Some of it needs to be added to your 401(k).
  6. A market correction is not a bad thing for a long term saver, buy more when it is on sale.
  7. Compound, compound, compound.
  8. Your retirement account is off-limits to your spending desires, leave it alone and let it work.
  9. When you enter the last decade of your working career, have a plan. A plan to protect what you have earned and to distribute your wealth as income.
  10. Lastly, be selfish with your savings. No one is going to build that retirement account but you. A wise man once said, “The most expensive thing you will purchase in your lifetime is your retirement.”

Long after I am gone and my daughter is older than me, sitting on a beach or by a lake without a financial care in the world, I want her to remember that I was there when she was 20.

Would you like to take a deeper dive? This article does a nice job covering the topic of millennial investing: https://www.bnymellon.com/_global-assets/pdf/our-thinking/generation-lost.pdf