For all you recent college graduates entering the workforce, I realize that "Start Thinking About Your Savings" might be the lamest piece of advice uttered to you since, "Wow! There Is No Way You’re OK To Drive Right Now". But I promise you, in both instances you’ll be very happy in the pants that you heeded both warnings.
First off, let’s take a little look-see at the financial future of our country. The way things are going, the idea of ‘Social Security benefits’ will be non-existent in the year 2041. Whoopsies! Therefore, if you’re 21 years-old right now, you’ll be royally screwed with a good few years to go before retirement age.
With medical advancements going the way they are, Super-Future-Year-2041-Viagra will be alarmingly good. And hot cougar retirees will be friskier and hotter than ever. Better have a little something put aside, if you want a piece of that ‘retired and ready to bang’ tail.
But forget about that for a second (if the imagery isn’t permanently burned into your brain already). The real point here is how saving just a little now, as I’ll demonstrate, gets you a lot more in the long run.
Case in point – you’re 21. You get your first job and wisely open an Independent Retirement Account (IRA). Now let’s say you take $2,000 out of your earnings each year and put that in your nice little IRA. You do this each year for four years until you are the ripe old age of 25. If at that point you sit on that IRA and let the magic of compound interest do its work you’ll have $552,625 when you are 65 years old and ready to retire. Insane, right?!
On the other hand, let’s say you’re a tool who acts like a jerk with your money throughout your twenties, ignoring that cleverly written and incredibly insightful WallStreetFighter article you once read. Then you miraculously wise up when you’re 35 years old.
But now at 35 after putting that $2,000 in the IRA every year until you retire at 65, you’ll only wind up with around a measly $361,000. Look how much less that is! Plus, you’ll have spent sooo much more money over the years paying into the IRA, whereas in the earlier scenario you’re only putting money aside for 4 friggin’ years.
So were all those cases of Keystone Light and bottles of KY jelly worth it in your 20s? Well, yeah of course they were, but imagine how much more of the future (and 10x more potent) versions of it you could buy with your $552k bounty in 2041. Gawd-dam, 2041 is sooo gonna rock!
Of course none of this is factoring in inflation, meaning money in the future will be worth a lot less than it is today. But still, the amounts will always compound the same. It’s like magic. However none of this is a fool-proof plan. The only way to be safe with any investment is to do your research and monitor what’s happening with your money. Then again with the stock market fluctuating like it is, you can’t completely rely on any investment to save your ass.
Here’s hoping that this advice, if it does nothing else, will at least get you thinking about saving your money. Save wisely, my friends.
Here are some good sites for more info on this and other saving advice. I swear they’re good. They didn’t even pay me to say that. That’s how good they are:
GetRichSlowly: What Is A Roth IRA and Why Should You Care?, June 5, 2007
MainStreet: 5 Ways Recent Grads Can Save For Retirement, June 18, 2008
Bank of America: Saving After College, June 2, 2008
MainStreet: Get The $200,000 Bonus You Never Knew About, May 20, 2008