Financial advisers urge saving for retirement early


Experts say compounding interest over time is employees’ greatest asset when saving for retirement. Courtesy Thinkstockphotos

(As seen on WZZM TV 13) Planning for retirement might seem trivial to younger people, especially when it is decades away. Nevertheless, it’s a highly recommended strategy by financial advisers.

According to Jim Klunder, senior financial consultant at Centennial Securities Company, younger individuals have a tremendous advantage if they get started early.

“The wonderful thing about getting started early is that you invest in investments that are designed to compound interest over the long term,” he said. “Compounding interest is a wonderful thing, but it takes a long time to happen. Time is really their greatest asset; time is the only thing they can’t get back.”

That time is measured by how long the average American spends in the workforce, which is between 30 to 40 years because most Americans retire at the age of 65, when they are fully eligible for Social Security and Medicare, according to Richard Sottile, financial adviser for Edward Jones.

Although Americans are expected to receive those supplements, like Social Security and Medicare, Sottile explicitly said those benefits are not meant to cover the cost of living during retirement.

“If you look at Social Security and what it pays out, it is considered poverty level,” he said. “It is not meant to be the solution for retirement, it is meant to be a piece that helps add stability to retirement.”

As a result, he encourages young adults to take advantage of the opportunities that employers provide, such as a 401(k) plan and a match opportunity.

“There are billions of dollars left on the table by people who are not saving through 401(k) and getting all the free money they can because they may need every dollar in their paycheck or maybe they don’t understand how it works,” he said. “Whatever it is, there is a serious lack of people taking those benefits that are offered to them and maximizing it to their advantage.”

There also are other employer-based retirement resources, such as pensions, 403(b), 457, SIMPLE and SEP plans, depending on the type of employer, but they are relatively the same, meant to financially prepare for retirement.

However, for those with an employer that does not offer a retirement plan, Klunder said they can set up a Roth IRA (individual retirement account), which allows them to invest up to $6,000 per year.

While there are ways to invest money into retirement, there is no manual that details how much Americans should save for retirement.

Sottile said once a young person starts investing for his or her retirement, he recommends checking with a financial adviser on a yearly basis.

“Just because you set a goal, especially a long-term goal, it is never going to stay the same,” he said. “It is going to adjust as life changes, it is going to adjust as we get older. Our resources will change, our job will change, our income will change. The ability for a good financial adviser is to sit down and continually adjust where necessary.”

There is a general consensus about retirement: It should not be a burden.

“I think it should be a rule of thumb or a general goal to retire debt free,” Klunder said. “To make sure to have your house paid off and car paid off. In today’s world, life expectancy has gone up, between 81 and 84 years old, although there are always surprises when it comes to health issues.”

Although there is no specific dollar amount to save for retirement, Klunder said he recommends saving according to the lifestyle you are living now.

“Each person is quite different than the other,” he said. “Some individuals do not spend a lot of money in retirement because they live a simple lifestyle because that is the lifestyle they’ve always lived. So, they just continue down that path. Then you have individuals who live expensive lives based on when they were working and now, they envision themselves continuing down that path.

“It really depends on the individual and what their lifestyle was and how they envision themselves now.”

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