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Thursday, September 4, 2008

On becoming a nag. . . . .

I had my hair cut today, at one of those cheap places where you never see the same stylist twice. It's always sort of a crapshoot: "Will my bangs be too short? Will the layers be short enough? Look at all that hair on the floor! I swear I asked for just an inch off the bottom!" Quite the adventure! I've still not been home to 'style' it the way I like it, so while I have a good feeling about this $15 haircut, the jury's still out.

Anyway, as I was chatting with the young stylist, she mentioned that she had just recently opened a savings account, with which she is going to save up for a trip to Europe next year. Excited, I immediately started asking questions: "What kind of savings account? Were there fees? Is she saving automatically?" Then I realized that I was asking very personal questions of a relative stranger, and shut my trap. I truly wanted to ask her about how she is saving for retirement, which probably hasn't even entered her mind at this point, but I successfully reined in my curiosity. Based on some other comments she made, however, I gathered that saving money is not her strong point.

I've been trying, for two years, to convince a young (28) coworker to open a tax deferred investment account in addition to the pension that we'll receive as state employees (assuming we make it to retirement age). He's been dragging his feet, and will probably continue to do so, regardless of my nagging (or maybe because of my nagging. . .) I use the words 'compound interest' and 'millionaire' many times in my little talks with him, to no avail. I simply can't understand his reluctance. Then, yesterday, I read this article concerning young Americans and their reluctance to save for retirement.

The survey results presented in the article indicated that young Americans (defined as those in their "20's and 30's") often cash out their 401(k) accounts each time they change employers, rather than letting the accounts roll over and continue growing! And most people will change jobs at least 6 times during their lifetime (I think I've almost hit that milestone). I actually have a friend who did this recently---she and her husband were moving across the country, and she took money out of her retirement account to use as savings while she looked for a job----as far as I know, it never went back into her fund.

Although I am in no way a financial expert, and my own financial history is less than stellar, I consider the money I put into my 403(b) to be sacrosanct, not to be touched unless there is a dire emergency. This is because I understand that I've waited a long time to begin saving, and I need all the compound interest benefit I can get so that I can someday retire. I only wish I'd figured all of this out when I was in my mid-20's before racking up thousands (and thousands) of dollars of credit card debt!

4 comments:

marci357 said...

You can use my PERS figures to convince your young coworker to do more - my PERS will only be $392 at 55 (next yr) or $482 if I wait for full retirement. Of course, I am no longer working a PERS job, so there is no way to add to it. I am planning on PERS, SS, 401, IRA's, CD's, investment income, and a $48/mo pension to pull it all off :) Plus the fact that I am debt free and can actually 'get by' on under $1000/mo easily. The funny thing is, that if I wait til 62 when SS kicks in (if it does) then I will actually have more coming in per month than I do now -won't that be a nice change of pace :)

And yes, I am well over the 6 jobs average - well over a dozen, not counting the parttime fill ins!

Like you, my money in IRA's, 401, and PERS is never touched! It would have to be a life-saving emergency before I would touch that!

Part of the reason that money is soooo sacred is that there is only me to provide for me. Therefore, I HAVE to do it myself, and as hard as it is to get the money in there to start with, there is NO way I will take it out til retirement, and then very sparingly and slowly.

When I change jobs, I roll things over directly into my Edward Jones account - that way I never ever touch the money and am not tempted to squander it.

Finally Frugal said...

I simply can't understand the reluctance to sock away even 5% of salary now, while it's easier----I try to think back to when I was just 'starting out', and wonder if I would have been as reluctant even if someone explained the benefits of compound interest. I'm just not sure!

Sounds like you're going to do what I'll be doing: cobbling together a retirement from many different types of pensions/retirement vehicles. Whatever works, huh?

marci357 said...

Yes - not all my eggs in one basket as they say. Diversification may not be the most aggressive way to save, but it sure spreads the risk out :)

Anna G. said...

For $20, you can go to Classy Lady on Beaverton-Hillsdale Hwy and get your hair shampooed, cut and styled. It's a bit more expensive than the Great Clips-esque places, but you get more for your money and the results are always great. It's the only place I've gone in the last 3 years.

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