Scott: For most young people, planning for the future means planning for prom or maybe even college. But what about fifty years from now? Well, in today’sGeneration Money segment, Demetrius Pipkin shows us why you should be thinking that far ahead.
Demetrius: So, have you thought about retirement before?
Student: I’m still in school. I’m thinking about graduating. So, no.
Student: I’ve got mad time.
Student: I mean, retirement is like I say 80 years old now. That’s way down the line.
Demetrius: And while that may be true, that hasn’t stopped these young people from dreaming big about what life could be like in the future.
Fifty years from now, you are done working. What do you want to be doing with your life?
Student: I just want to travel the world.
Student: Hopefully in Cali by the beach.
Student: Lay back and just chill.
Student: A nice contemporary house, probably a Ferrari, you know?
Demetrius: A Ferrari?
Student: Yeah, that’s my dream retirement scenario.
Demetrius: But those big dreams can come at some big costs. And George Castineiras, a retirement specialist, says to this younger generation of Millennials, the word ‘retirement’ is being redefined.
George Castineiras: If you ask a Millennial how they view retirement, they don’t. It doesn’t even register. But if you ask them, ‘At what age do you want to start working for yourself to do the things that you care most about?’ ‘When I’m 25.’ Right? Well, you have complete control over that.
Demetrius: The secret, he says, is to start planning as early as possible. A recent study done by Prudential showed that 83% of young people are actually very interested in saving for the future because with the downturn of the economy, they have seen the consequences of not saving, like parents losing their jobs or grandparents having to move in with other family members.
Castineiras: As soon as you make your first dollar – and I don’t really care if that is at a bake sale – take that dollar out of the ten that you are making, put it aside.
Demetrius: So you are saying for every dollar a young person makes, save 10 cents of that. For every $10 they make, save a dollar of that. And it will make a difference?
Castineiras: A twenty year old making $30,000, right? I’m not going to assume your salary increases and all you’re doing is putting 10% away of that $30,000. That salary never increases for 45 years. Your accumulated wealth, if you started at 20, $885,000.
Castineiras: Go to 30. Those ten years, that $885,000 that I talked about gets cut in half.
Demetrius: And you do have some options for what kind of account you can use to save that money. Of course, there is your regular checking and your savings account. But when it comes to planning for retirement, there are specialty accounts you can open up specifically for that purpose. The first is an Individual Retirement Account, or IRA account, that anybody can open. It gives you huge tax breaks for putting money into them for retirement.
If you have a job, then there is also the option of a 401k plan, which is similar to an IRA except it is offered by many employers and the money can be taken automatically from your check. Most companies that offer a 401k plan also offer a company match, which means they will give you money if you contribute your money to the plan.
Of course, the most important thing is to start saving now, even if it is just a little bit.
Castineiras: Pay yourself first…something, as early as possible. Don’t stop. Make it a habit and I guarantee you your debt will eventually get paid off. But the accumulated wealth that you will start to get just because you started so early is tremendous.
Demetrius: Demetrius Pipkin, Channel One News.
Scott: So we want to hear from you. Have you thought about saving for retirement? Well, head to ChannelOne.com and let us know. And if you have got any great tips for saving, please share those too.