Too young to think about my retirement?

[Ninja]

I'm 21 and I've been thinking a lot about my retirement lately. I don't know how it is in the States (where I think most of the forummers here live), but here in the Netherlands, talking about money is a big no-no. It's just 'not done', and when someone comes with an ambitious plan to start a business or invest in stocks, people will shake their heads. There's a saying: "doe maar gewoon, dan doe je al gek genoeg". Translated, it means something like: "just act normal, then you will already act crazy enough". I've always hated it with a passion. I like "wie niet waagt, wie niet wint" (who doesn't dare, doesn't win) at lot better

Anyway, the minute the word 'retirement' leaves my mouth, the 'herd' immediately tries to talk me out of it. I'm too young to think about it, your twenties are a time to party (ugh), just get a job first and when you've worked your way up the corporate ladder, you can always consider saving for old age. You're not very likely to succeed though, since you'll have kids by then and those cost a lot of money. . The list goes on and on. Apparently, thinking about your 'golden years' should not be done in the *squeal* best time of your life, and a young girl like me should just stick to partying for now. Just leave preparing for old age to the grown-ups and have another beer or two. Or children. Or both.

frustrated by my peers, I turned to my parents and asked what they thought. They said that it's aways wise to think about your future, but that at 21, I shouldn't be worrying about my retirement yet. I didn't go on about it, but I disagree with them: I read something about 'compounding interest' and if I got it right, it's better to start saving early, because you're own imput can be lower. If I were to start in my thirties or even my fourties, I'd miss about 10 to 20 years worth of compunding interest, and I would have to put more of my own money in to get the same results.

I did a lot of calculations and they all say my parents and peers are wrong. But if that is true... why do so many people hold off saving for retirement? Am I seeing something they are not, or am I just being paranoid?

[Tabetha]

ninja said:

I did a lot of calculations and they all say my parents and peers are wrong. But if that is true... why do so many people hold off saving for retirement? Am I seeing something they are not, or am I just being paranoid?

I suspect it's for similar reasons that many people put off planning or thinking about such later life decisions as wills and estate planning, etc. Thinking about such things makes them feel more real, therefore stirring up fear of the unknown/ loss of control.

The earlier you can save money (for any purpose, not just retirement) the longer you will have to enjoy the magic of compound interest (I wish I had known more about it earlier).

At age 40, I'm just getting started looking into that stuff now (some of this might be U.S. only--IRAs, online high interest savings accounts, index funds, etc.).

As long as you keep things in balance and don't let planning for the future distract you from interesting opportunities today (ie. travel, starting a business, buying a house, etc.), I can't see how letting some of your money work for you now can hurt you in the future.

[Karlita]

I have to agree with T. Dunn on this one, Ninja. I'm 26 and while I'm not currently saving for my retirement (that will change in May), I am putting some money back for various things ie. - money to travel, new furniture, etc.

It's very smart to start saving at an early age, but putting money aside to have fun is just as good of an idea as saving for retirement. I can't blame people for telling you to have fun and enjoy your youth, but if you have a little money put aside to do so you'll be able to do more during your youth! So save on Ninja!

[Ninja]

I'm not planning on living in a cardboard box just so I can put a few more bucks into my retirement fund, don't worry about that I'm just a bit frustrated with my peers. An example: my old computer broke down last week. I had upgraded it several times with new parts, but I knew that I couldn't keep patching it up forever. This time, several parts fried at once and it was just cheaper to get a new computer rather than replace the damaged components. I need a computer for my studies and having to use the school computers or my parents computer is not ideal. I have to wait my turn, work in a noisy enviroment, and the machines just weren't powerfull enough for the programs I needed to run. Thus, I pillaged my savings and bought a new one the same week. No problem.

As if on cue, my friend's computer also kicked the bucket a day later. Like mine, it was beyond saving (and smelled suspiciously like grilled cheese) and getting a new one would be cheaper. unfortunately, even though her income was higher and nessecary expenses were lower (unless you count beer and sigarettes as such), she did not have a penny in the bank. But we do the same study and a decent computer of your own is something you just can't go without. So what did she do? She got a creditcard...

She's confident it will 'work out' and won't listen to me when I tell her that she's digging her own grave. Creditcards can be great for some people, but if she can't even bring herself to put some booze money in her savings as an 'emergency fund', how will she pay off the bill?! The interest is going to eat her alive and I feel like I'm shouting at a movie character: "Don't go in the haunted house! Don't leave your partner in the car! Look behind you!!!".

I want to have a good time, because well... here's always that bus that could run me over tomorrow. But if I had follower her party-today-and-don't-worry-about-tomorrow aproach, I would now be up to my armpits in debt. It's just not worth it.

[Karlita]

Sounds like you've got a good head on your shoulders! It's always good to have some cash stashed away for the unexpected, which is a lesson your friend hasn't learned yet. Some people have to go into debt and dig their way out before they listen to good advice. Just keep on doing what you're doing and hopefully your friend will learn from your example.

[Ninja]

karlita said:

Sounds like you've got a good head on your shoulders! It's always good to have some cash stashed away for the unexpected, which is a lesson your friend hasn't learned yet. Some people have to go into debt and dig their way out before they listen to good advice. Just keep on doing what you're doing and hopefully your friend will learn from your example.

I should probably thank my parents for that . They gave me allowance and later 'clothing money' at a relatively young age. Allowance when I was six, clothing money when I was 12, and a little more when I was 14 (first I only had to buy normal clothes and later I also had to buy shoes, coats and underwear). I could spend it all on desiger bras and Star Trek video's if I wanted, but when it was gone, it was gone. End of story. If I spend all my money on a ridicously expensive skirt, that meant I would have to wear my paperthin summercoat in the winter. There's quite nothing like freezing your butt off and only having three pair of old socks in your closet to learn the importance of saving ;D

[mtcrowe]

Saving money isn't just for retirement or things you want to buy or do. I run a brain injury support site and know that a person's life can be turned upside down in an instant.

An easy way to start saving is with a savings account . Find one that also uses money market or precious metal trading to incure interest. The best thing about this is that you gain interest while not worrying about penalties should you need to take money out. If you want to do the research and take some chances, you can do your own money market savings. Imagine if you had bought 1000 euros before they became the dominant currency and traded them in today.

A nice trick for saving is to make yourself a budget of exactly where your money goes. The big mistake most people make is to spend the extra money they have. If you stick this extra money in a interest incuring savings account, you can not only gain interest but end up with quit a bit of money you never realised was available to you. To see how this works there's a trick me and my wife use. When we buy something at the store that will give us a few dollars worth of change or less, we stick that in a jar. In a month the "Pocket change" from this can end up being $100. That's money that we could have spent on a whim and never knew we had.

[lys]

I agree you're on the right track, Ninja. And I dont think its ever too early to start thinking of retirement. I have just recently thinking about how to become more pro active than I am to afford to live comforably when I retire. I live in the States, and Im 30, so Im not planning on Social Security to be there when I retire in 30 or 40 years. Thats the truth of the U.S. So I bought a book today as a matter of fact, its called "Grow Your Money", by Jonathan D. Pond. I didnt read it yet, but I looked through it at the book store. The kicker that made me buy it was this:

"The easiest way to achieve your financial dreams is to avoid taking financial responsibility for anything that eats...." I thought that was hysterical!!

It goes on to say if you have a pet, significant other or kids, its not too late for you. And honestly, who eats more out of this three?? Yep, growing children.

[Ninja]

mtcrowe said:

Saving money isn't just for retirement or things you want to buy or do. I run a brain injury support site and know that a person's life can be turned upside down in an instant.

An easy way to start saving is with a savings account . Find one that also uses money market or precious metal trading to incure interest. The best thing about this is that you gain interest while not worrying about penalties should you need to take money out. If you want to do the research and take some chances, you can do your own money market savings. Imagine if you had bought 1000 euros before they became the dominant currency and traded them in today.

I live in the Netherlands, I already have Euros . I do a lot of my shopping in American internet stores though. Even with shippingkosts, I can get a lot of things like clothing dirt cheap thanks to the crippled dollar. I've saved a lot this way! ;D
I've considered trading my euros for dollars, but decided it's too risky. Little red flags are popping up everywhere, telling that the dollar is about to crash and burn. When American milionairs are feverishly trading their dollars for euros, that's a sign that it's time to panick. People think the dollar won't fall, but that's also what they thought in Brittain about the pound... Remember George Soros?
I won't invest in gold now, since the price has been inflated by panicking investors. Whenever someone whispers the word 'recession', people scramble to buy gold, inflating the price beyond what is reasonable. I'd rather wait until the next stock market boom when people loose interest in precious metals again

A nice trick for saving is to make yourself a budget of exactly where your money goes. The big mistake most people make is to spend the extra money they have. If you stick this extra money in a interest incuring savings account, you can not only gain interest but end up with quit a bit of money you never realised was available to you. To see how this works there's a trick me and my wife use. When we buy something at the store that will give us a few dollars worth of change or less, we stick that in a jar. In a month the "Pocket change" from this can end up being $100. That's money that we could have spent on a whim and never knew we had.

I think that's a mistake many people make... I've heard it even has a name: lifestyle inflation. People earn more and automatically spend more. without realizing that the party might not last forever. I was watching TV yesterday and there was a report on one of our politicians who makes about 130.000 euro's a year. He lives in a huge house (it looks more like a hotel!), drives a enormous, gas-guzzeling car and eats at the finest restaurants at least twice a week. Sweet batman! If I earned that kind of cash, I would buy/rent a house no larger than I needed, drive a small secondhand car (if I was allowed to drive that is... I take meds that affect my reactionspeed ), cook my own inexpensive meals and retire comfortably within ten years. What good is a goliath sized car going to do you when you spend most of your day slaving away at the office? Time is money, but people forget that money is also time. If I had to pick between a few luxurious tropical vacations a year, or getting to spend the whole year sipping drinks in the backyard without ever having to set an alarmclock again, I'll take the backyard anyday!

[happy2bchildfree]

I think that saving is an important thing to do, and I wouldn't be one to live to excess (assuming I had the money to do so, which I don't), but I am also not one to deprive myself of life's pleasures and of things I want and need just for the sake of saving money. Saving can become an unhealthy obsession.

Life is short, and there are no guarantees of time. I want to enjoy it as much as I can while I'm here. I've seen too many people who had no more than the bare essentials (and who could well afford more!), depriving themselves so they could save the money for "someday". Their "someday" never came, because they DIED before they were ever old enough to retire, and their heirs inherited the money to use and enjoy. I'm not going to be one of these people.

Anyone seen that "Feed the Pig.org" commercial? I hate it! It really grates on my nerves.

[Ninja]

happy2bchildfree said:

I think that saving is an important thing to do, and I wouldn't be one to live to excess (assuming I had the money to do so, which I don't), but I am also not one to deprive myself of life's pleasures and of things I want and need just for the sake of saving money. Saving can become an unhealthy obsession.

Life is short, and there are no guarantees of time. I want to enjoy it as much as I can while I'm here. I've seen too many people who had no more than the bare essentials (and who could well afford more!), depriving themselves so they could save the money for "someday". Their "someday" never came, because they DIED before they were ever old enough to retire, and their heirs inherited the money to use and enjoy. I'm not going to be one of these people.

Anyone seen that "Feed the Pig.org" commercial? I hate it! It really grates on my nerves.

I've heard stories about people who got hit by the proverbial bus and never enjoyed their money, but I've heard even more stories about people who did get old and were forced to literally work themselves to death. It's not healthy to live in the future and forget about today, but it's also not healthy to completely ignore it. I don't want to work my butt off until I'm 65 just so I can eat in a three-star restaurant every week. But I also don't want to deprive myself of all life has to offer. It's all about balance, I guess
by the way... the best things truly are free. To me, taking a walk on the beach while everyone else is stuck in an office cubicle would be worth a lot more to me than just another shiny gadget. My goal is to invest and retire early, even if that means I would have to live frugal. Time is much more important to me than stuff: the latter won't create memories that will comfort me on my deathbed. Because you're right: life is short.

[fencesitter]

Ninja, you've got it all 100% right. Hopefully, your government offers ways to save portions of your income in tax free accounts that you cannot access until retirement. That is the ideal way for compounding to work for you. If you save as much as you can when you're young, it will pay HUGE dividends within just a couple of decades. You'd be shocked to see how the numbers work. The keys are: tax protected accounts, saving a set amount every month without fail, and investing in value and growth investments--no risk, no gain...you are young, so stay away from guaranteed interest, which usually barely beats inflation (and once the tax man gets his share, you may even LOSE money).

Time to enjoy life really is the most wonderful gift one could hope for. You are so fortunate to be as wise as you are at such a young age.

[Ninja]

fencesitter said:

Ninja, you've got it all 100% right. Hopefully, your government offers ways to save portions of your income in tax free accounts that you cannot access until retirement. That is the ideal way for compounding to work for you. If you save as much as you can when you're young, it will pay HUGE dividends within just a couple of decades. You'd be shocked to see how the numbers work. The keys are: tax protected accounts, saving a set amount every month without fail, and investing in value and growth investments--no risk, no gain...you are young, so stay away from guaranteed interest, which usually barely beats inflation (and once the tax man gets his share, you may even LOSE money).

Time to enjoy life really is the most wonderful gift one could hope for. You are so fortunate to be as wise as you are at such a young age.

Unfortunately, our current government does not like to see people retire at all, let alone young. Some options are interesting if you just want to save money taxfree, but if you plan on investing like me (and stay ahead of inflation), it's better to keep your cash in your own pocket. There used to be more ways to make retireing early a possibility, but our birthrate is dropping rapidly (Holland... new home of the childfree? ), especially amongst those higher educated. The government is getting desperate to keep everyone working as long as they can and guilttrip them into having more baby taxpayers, but I refuse to let them get to me. Did I ask for the parents of the babyboom generation to breed like rabbits? Did I even ask to be born myself? There are 17 milion of us walking around on land that we took from the sea, roads and rails are completely clogged as it is, and there are even plans to build an additional island in the shape of a tulip! A friggin' tulip! My parents had me because they loved children, not because they believed 'the hive' needed more workerbees. Queen Bee can kiss my childfree ass.

Besides that... doesn't an economy need investors? If companies can't get funding, no new jobs will be created. If anything, they should make things easier for us, not more difficult.

_{Whew, had to blow off some steam there. Sorry about that.}

[shell]

I agree, it is all about balance. I am very against packing all my money away for retirement, and always have believed in living it up while you can!! Although my in laws criticised us for years for travelling, saying we 'should' be paying bills, investing, or whatever (we do that too). My father in law saved it all for retirement, and died 1 day before he retired from a company he worked at for 25+ years. Tragic. But a reminder to enjoy life ALWAYS!!
Shell

[Ninja]

shell said:

I agree, it is all about balance. I am very against packing all my money away for retirement, and always have believed in living it up while you can!! Although my in laws criticised us for years for travelling, saying we 'should' be paying bills, investing, or whatever (we do that too). My father in law saved it all for retirement, and died 1 day before he retired from a company he worked at for 25+ years. Tragic. But a reminder to enjoy life ALWAYS!!
Shell

It's tragic to see someone playing Scrooge all his life and never getting to enjoy their money . I will save money rather than spend it on booze like my friend, but I plan to go to a desert (have yet to pick one) and see the stars without 'light pollution'. I'm not going to wait 25+ years to do that...

[sweetnsour]

I'm with Shell, you live today because you don't know what tomorrow will bring. However, as I look back, I would have done some things differently. I would have at least put away at least 15% of my gross income into retirement savings. Start now while you're in your 20s and if all else goes well, you'll have a nice egg nest to fall on.

[Ninja]

sweetnsour said:

I'm with Shell, you live today because you don't know what tomorrow will bring. However, as I look back, I would have done some things differently. I would have at least put away at least 15% of my gross income into retirement savings. Start now while you're in your 20s and if all else goes well, you'll have a nice egg nest to fall on.

That's the main reason I want to start young: I'll have to put away less a month than if I were to start ten years from now, or more. Compound interest, baby! ;D

_{And it's always nice to fantasize one of your stocks suddenly turning into the next Apple in five years... *daydreams*}

[fencesitter]

You don't have to deprive yourself or "play scrooge" to save for the future. As you said, if you save a set amount when you're young, even if it's modest, compounding does all the work for you. By the time you're 40, you'll already have a nice nest egg. There's NOTHING like the peace of mind you have knowing that you can afford a few extras without going into debt and knowing that you can retire early if you prefer, all because you saved a few bucks when you were young.

Live for today, but don't spend every red cent that comes your way. That's just plain foolish, and a guaranteed way to never retire comfortably. Yes, we can die young and it's all for naught, but not saving money simply for that reason is absolutely idiotic.

[shell]

Yup, it is all about 'balance' fencesitter.

[ana]

I started saving for retirement when I was 24. As an accountant, I saw how much my money grew and when I was in my early 30s, for every dollar I saved, my boss (in his 40s) had to put away $3 to my $1. Another partner in the business in his 50s had to put away $7 to my $1 to have the same amount at retirement that I had.

Balance is key. But, if you start saving small amounts early, live within your means and don't over-extend on credit you will be surprised as how much money you will have to enjoy life in the present.

I can buy what I want, travel wherever I want (having enough vacation time is the only problem!) and not have to worry about making ends meet. That early retirement fund sure becomes a nice nest egg that can protect you from unexpected expenses without having to borrow.

My belief is that it's never too early to start saving.