How college grads should begin their reitrement savings approach

Bob Powell, Editor at Retirement Daily, explains how recent college graduates should approach saving for reitrement.

Transcript

00:00So we hear constantly, and we talked a little bit about this earlier, that everyone should

00:05start as early as possible to save. But how should recent college grads approach this?

00:14So I think two ways, right? A lot of people are overwhelmed. I can tell you, for instance,

00:19my daughter entered the workforce, she got thrown the employee benefit handbook

00:24and was told, here's your 401k and I get the call, what should I do?

00:28And for many people, the answer is invest in a target date fund, because what it gives you

00:34is an asset allocation, a mix of stocks and bonds that are appropriate for your age.

00:39And assuming that you're going to retire in 44 or 45 or 50 years or so, that target date fund

00:45will adjust its asset allocation to become less aggressive and more conservative over time as

00:50you approach your target date of retirement. And it's sort of a plug and play type of mutual fund

00:56where you don't have to worry about rebalancing, you don't have to worry about how it's invested.

01:03And so for many young people, this is an easy way to get started, especially if they don't

01:07have any experience with investing. For people who might have some experience, you might want

01:11to choose a different route. Maybe you'll choose to invest 90% of your money in the S&P 500 index,

01:16or put some of it in the NASDAQ 100 or whatever it might be, and a small portion in fixed income

01:21to give you some asset allocation and diversity. So I think those for me would be the two ways to

01:28go. If you're inexperienced, choose a target date fund. If you have some experience,

01:33choose an index fund and manage it as appropriately as you see fit. And I think that will get people

01:38at least started, and then start reading. Pay attention to the articles that we're publishing

01:45on the street. Pay attention if you're in a 401k, the provider is likely to send you

01:50lots of educational material. They're likely to offer you tools and calculators to use.

01:55Take advantage of those things. They're useful because at least it puts it front and center.

02:01The last thing that you want to do is not pay attention to your retirement account. Don't

02:06discard the envelope if it's coming in the mail to you. Don't just delete the email if it's coming

02:12in that says, here's what your account balance is. Do a check-in with your money. This is ultimately

02:17what's going to be used to create your paycheck in retirement when you no longer have a W-2 or

02:22a 1099 coming in. So pay attention to your money. Don't just set it and forget it. Become an

02:29educated consumer. And I think that will go a long way toward helping you make sure that you

02:35save enough for retirement. Ultimately, that's the goal. You want to save enough

02:39to fund a desired standard of living for decades of free time in retirement.

02:47you