Last summer I opened a Roth IRA (individual retirement account). A few friends thought that I was crazy for doing so. After all, I have not even graduated yet, and unfortunately, I probably will not retire for over 40 years (unless I end up winning the lottery). What is my rush?
The way I look at it, it is never too early to plan for your financial future-especially these days.
In the “good ol” days, corporate America offered employees compensation packages that were like pots of gold; nice pension plans, large bonuses and boundless prerequisites were just a few components of compensation packages. However, in post-scandal corporate America, you really have to hunt around for one of those pots of gold. It seems that a good number of employers are not putting as much in these “pots.”
IBM and Verizon are two major companies that recently froze pensions for employees. Interesting to note, these companies are not in bankruptcy. Many companies are offering employees less in compensation packages; more healthcare costs are being shifted to employees, and rising healthcare costs have even forced some employers to cease healthcare benefits for retirees. As more companies file for bankruptcy re-organization, pension plans are being dumped onto the Pension Benefit Guaranty Corporation (a government agency), and the payouts of these pension plans are being slashed.
I do not even think that I need to address the current Social Security situation, which is serious. Social Security will not serve as a primary source of income, but it will be a supplement to income.
Pay cuts and layoffs seem to have emerged as common practices for too many corporations. The bottom line is that companies are not as “parental” anymore; employees must “fend for themselves” more often.
Enron, WorldCom, Global Crossing, Adelphia and Tyco have shown us that companies have no problem walking over their employees.
Maybe it is because the corporate scandals have made me feel a little cynical about business, but I think it is a bit naive to expect a company to take “complete” care of its employees these days. It is time to start protecting yourself by becoming more self-reliant.
However, becoming more financially self-reliant is challenging for our generation. A study recently presented at the Federal Reserve showed that high school students lack basic financial knowledge.
Take the time to learn financial concepts so that you do not have to rely on the word or advice of others. “Poor and broke” are often used to describe college students. College students can spend well; after all, spending is fun-it is especially enjoyable for DU students with Park Meadows and Cherry Creek.
On the other hand, saving is not as fun. Receiving a monthly statement for money that, in essence, you cannot “touch” until you retire is not very much fun.
However, working forever is likely worse. Think about what is important and what you really need and want. Each of us can shape and influence our futures, and we should all do so.
