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Data from Fidelity shows that only about 45 percent of Americans are financially prepared for retirement. For young people, it’s especially important to know how to save and to start early.
In part two of our week-long series on retirement, Here & Now’s Jeremy Hobson talks with certified financial planner Jeanne Fisher and one of her clients, Diane Fedor, a 28-year-old from Nashville, who is a recruiter at a dental support organization.
Jeanne Fisher on the state of retirement in the U.S.
“Fortunately for us, we’re dealing with people who are engaged in their own retirement and working towards a plan. But as far as the general public, I think the latest statistic I heard is two out of three baby boomers are not prepared for retirement and certainly not ready to maintain the living standard that they have currently, so overall the retirement picture in America is actually very poor.”
Diane Fedor on when she began saving
“At 21. … I want my retirement to be on my terms, not on the government’s terms, so I started saving quite quickly when I got out of school.”
“It is challenging to think about retirement that’s 40 years away when we’re trying to pay for a house and a car and eventually have children of our own. So that feels much more the here and now than a retirement that feels very far away. It really is a balance between making sure that our retirement is looking good, but also living the life that we currently get to have.”
Jeanne Fisher on the conversations she has with clients who have student loans
“This is actually a conversation that we have quite a bit and there’s many variables that come into play. We consider the interest rate on the student debt, we consider the income of the family and whether or not they are still allowed to get the student loan interest deduction based on their income. I can tell you that, generally, we advise a mix of both trying to be aggressive with your student debt but certainly not forsaking all retirement savings. And that really comes back to the value of compounding interest and how much ahead of the game you are if you actually start saving young.”
Jeanne Fisher’s advice for people in their 50s who haven’t started saving
“If you are coming to us at age 50 and you really haven’t started anything, we’re having tough conversations about where you can cut back and how you can save because, at that point, the monthly savings need is significant to meet any type of retirement picture, and then of course we’re actually looking at lifestyle in retirement and what they expect that to look like. So that’s a very tough conversation that we have to have.”
Jeanne Fisher on whether she ever advises people to work longer
“Absolutely. It’s amazing how just a one year delay in retirement can have a very significant impact. Not only are you delaying tapping into your nest egg, but you are saving for another year. So quite often we come back and say, ‘If you want a good positive picture, you probably need to work a couple more years.’”
Diane Fedor on the advice she would give to her fellow millennials
“I would say, ‘Start now.’ Your retirement is closer than you think. So, start asking the questions. Start a Roth, start a 401(k). Even if you can put in $50 a month, it compounds so quickly, so starting at a younger age is definitely going to help you. Even if we have to cut back a little bit on our retirement to live the life that we’re trying to live now, at least we have something going towards it.”
Jeanne Fisher on whether it is problematic that millennials tend to jump from job to job
“This would probably be my soapbox issue with millennials, if I had one. We don’t have the pension plans like we used to have, we have the 401(k)s, and most of those have an eligibility period of a year. When you finally get into the plan, there’s limitations on vesting, you have to be with the company for so long to be entitled to the entire match. And then, on the other side, if you’re leaving your account balances too small, many plans force you to cash out. And what we’re not doing is slowly letting that snowball grow. We’re job hopping, we’re cashing out these small balances, and we’re losing that seed money that we start out with in our 20s. So, what it’s become for the millennials, they have to take so much more ownership of their retirement picture. They have to make an effort to enroll in a plan, contribute to the plan and when they leave the job take whatever they have available with them and continue to grow that.”