Take your free money people!
Posted on March 14th, 2008 – 11:59 AMBy Kara McGuire
I take a look at the headlines on Investment News daily and noticed one a few weeks ago that caught my eye about young workers and employee matches.
The story was based on data released from the Employee Benefit Research Institute last year that said 71 percent of full-time workers ages 21 to 24 were not enrolled in their workplace retirement plans.
Not that every employer offers a match. But if yours does, the “.50 cent for every dollar you put in” match which is most common, is more lucrative than you’d think. Invest $100 and that’s $50 for free. Over and over and over again. Not bad. Those matches are getting more generous too: One in five companies plan to increase matching dollars, according to Hewitt Associates.
The Investment News story quotes Brian Jones, a 30-something adviser and author I’ve spoken with in the past who works with young workers. He suggests that workers getting started should ask their parents to help them save for retirement if living expenses make it nearly impossible for them to do it on their own.
I think it’s a great idea in theory– especially since starting early is one way to amass lots of money without major sacrifice. But I don’t know if that’s realistic considering many parents are unprepared for retirement and need to save that money to fund their looming golden years.
I think the right way to save for retirement is skip a few iTunes downloads and head to happy hours at the cheap bars, not beg mom and dad to fluff up your nest egg. They already hatched you and fed you worms for 20+ years (forgive me for taking that too far, but it’s Friday).
13 Responses to "Take your free money people!"
I absolutely agree. I realize that when you start out,money is tight. But just start small and be firm about doing it. Promise yourself that you’ll keep at it rather than sucumbing to the ITunes or Caribou quite so often and you will surprise yourself down the road. It is important to start early, because who else is responsible for planning for your future but yourself?
I definitely agree that it’s important. I’m 24, and I’ll admit when I started my first job out of college at 22, I waited a few months before starting a 401(k) because I wasn’t sure what expenses I would have, since it was the first time I was completely supporting myself. But then I did, and it was extremely easy. I was also quite surprised at how much I had earned when I rolled it into a traditional IRA (when I left my job). Unfortunately now I’m at a small daily newspaper (in Ohio … yeah can’t wait to move back to MN, but that’s an entirely different topic) where we don’t have retirement plans, so it definitely makes it tough to save. If you can get the free money, don’t hesitate to take it.
The very notion of asking for a match for retirement money from parents is so welfare oriented. Self reliance doesn’t mean asking Mommy and Daddy for money when you’re a grown adult.
“He suggests that workers getting started should ask their parents to help them save for retirement if living expenses make it nearly impossible for them to do it on their own.”
I wonder how many of those kids’ parents have properly saved for retirement & thus have extra funds laying around to help their kids out.
I think there’s a lot of assumptions in Mr. Jones’ suggestion. The first is stated, “if living expenses make it nearly impossible for them to do it on their own.” I read “living expenses” as rent, food, & heat - not lattes. The unstated assumption is that the parents have the money to spare. Some will. Most won’t.
Given all those assumptions, this is probably a pretty rare scenario, so why even suggest it? You got me. Best thing you can “pass on” to your kids: skills to live on their own.
Get real. There are 45 million people who can’t even afford health insurance - and they should save for the future? Save where? In the stock market - where just about everyone’s 401k lost money last year? who do you work for, Wall Street or a newspaper? Also - the so-called “Employee Benefit Research Institute” represents who - employees or employers? Guess what - it’s members are the nation’s biggest employers. Think they have their own best interests at heart or their employees?
I did save for retirement - I am now 43. Took at $17k pay cut at the beginning of 2001 and still haven’t worked back up to that level of pay. I don’t have kids and over 50% of my take home pay goes to housing (mortgage $150k on 30 yr. fixed @ 6.125% in a low-income neighborhood) and unless I cashed in my retirement the County would not help me with energy assistance. Of course, once I cash it in and take a big hit then they still wouldn’t help me. Either way, it was an asset and too bad. Needless to say, I didn’t cash in my retirement to pay Xcel outrageous energy bills. It would be nice if I could budget for things like groceries, but it ain’t happening any time soon.
Ask my parents? Dad died in 1989 and mom is pushing 80. As it was they only grossed $9000 in 1981 and the college I went to still thought they could contribute(?!).
Until incomes are in line with the cost of living and eligibilty to pay is based on net and not gross, our citizens will have economic trouble for years to come.
You better be saving for your future, because no one else is. I’m 30 and I’ll be lucky to get anything out of social security when my time comes.
Even when I was barely paying bills, I was contributing at least 3% ever since I got out of college. If its coming right out of your paycheck, you don’t even notice it. Rather than asking mom or dad for money to fund retirement, I’d be asking them to move in until you can support yourself - it would be cheaper for them!
I agree with Bill. Asking parents for money after high school and college graduation is pathetic. I have certainly had help from my dad, but I’ve always paid him back or paid the bank (on time!). It’s a respect I have for myself and for my father, as well as for the money we make working hard. BTW- loved your last statement. Very true.
Rob, I believe you may be confused. First, health insurance is an important issue however I’m sure if these employees discribed in this article are receiving a 401k matching contribution plan they are receiving some sort of employer subsidized health insurance. The article wasn’t directed to the uninsured. Secondly, if someone is going to save $1.00 and their employer will match $.50 that right there is a return one could only hope for in the stock market. You are far ahead of a normal investor who only invested $1.00 and did not get the contribution. I’m not going to get into the other multiple benefits, but if you fail to invest in a matching program you are leaving money on the table. That to me is like saying to your employer, “Thanks for the offer but I don’t want to take that much money from you.” Wake up people!
One question I have for everyone. Does saving ever get easier? I’m just coming off my 25th Birthday and always hear this line from parents, in articles, or more general, people older than me. It goes along the line like, “You are just starting off.” or “It’s hard when you are starting out.” Is there any point that saving will get easier? How is it going to get any easier? I only see expenses going up! We have wedding rings to purchase, weddings, children of our own, DAYCARE, coming over the next 10 years. I don’t see it getting any easier unless salaries increase exponentially after getting out of that “just starting out period…”
Rob: This is retirement money. Not spend next week money. It doesn’t matter AT ALL if the stock market is going down. Well, it does, in a way. You can buy more shares for the same amount of money. But if you have your money in mutual funds (every retirement plan I have seen does not allow investing in single stocks. Except for the company you work for). And you don’t need the money for 30+ years (Ie when you retire) then there should be no problem putting it in the stock market, regardless of whether the market is up or down. The BEST time to buy in the market, after all, is when it is down. Because then your money grows when the market rebounds.
Dollar-cost averaging (putting the same amount of money in on a regular schedule–say every paycheck) is the best way to smooth out the natural ups and downs of the markets.
Of course if, when the market goes down, the first thing you are going to do is pull all your money out. And then put it back in when the market goes up. Then you want to make sure you put your money in bonds and the bank instead of the market — things that are more stable and won’t cause you to solidify your losses and lose out on the gains.
Or, better yet, realize this money you are saving is for many years down the road and just put the money in, not looking at the statements to see “how much I have” Then you won’t see the paper losses and they won’t hurt.
Matt - it doesn’t get any easier. That said, put away some cash while you can without turning into a miserly crank. This means employing some common sense, balance and being willing to be a contrarian…
