It is Mid-May 2021, and a new wave of young adults recently exited the halls of academia, entering the world of adult responsibilities. Those looming responsibilities present challenges. Sarah Brooks recently identified, on iGrad, lifestyle adjustments (relocation from family and friends) and excessive demands (obligations beyond the workplace) among 5 key challenges graduates face. Sharon Elber, on WorkBloom, cited unrealistic expectations (“I will land my dream job”) and a lack of clear direction about the ultimate career path in her 5 common problems recent grads face.
Imagine beginning another exciting day of preparing and mailing resumes. You take a break from the task of folding, inserting, and sealing to leaf through the recently arrived mail. Your hope is just one of the envelopes includes a positive response to a resume mailed earlier. Instead, you find a letter encouraging you to begin preparing for retirement while you are young. Preparing for retirement is a joke at this point, you think. How can anyone think about preparing for retirement with all the issues consuming your concentration, energy, and emotions?
As the CEO of the Christian Churches Pension Plan, I understand one of my roles is to remind recent college graduates about retirement when all they really want to do is say, “Later.” I understand there are legitimate financial and emotional pressures building both inside and outside your life at this moment. In spite of these realities, this post is a call to slow down a moment, stop saying later, and consider the long-term consequences of seemingly small decisions we may make in our younger years.
Another article crossing the desk today was posted by Amos C in entrepreneur.com. His article was not directed toward recent graduates, but toward those who are either living in or approaching their retirement years. The premise of his post is that people should consider investing a portion of their funds in one of 5 stocks. One of the major reasons the author recommended them is each company has a policy of paying monthly dividends.
Anyone may reasonably debate any of the stocks mentioned within the post. Other financial advisors and writers may rise to debate the wisdom of an individual selecting stocks for investment, contending the selection of professional investment managers offers a better path to retirement success. The point I wish to make is the author is addressing people who have the funds available for investment. The author’s intent is to help readers have a better financial life. The author specifically stated, “If you are looking for some additional cash flow every month, top monthly dividend stocks should be on your radar.”
My point is equally pointed. I want every recent college graduate to be able to make financial decisions that will increase their income during the senior years. I want you to have the financial resources to choose to make your own investments, or to choose to invest through qualified professionals. I know any opportunity you may have to make such decisions will be greatly impacted by small decisions you make in the early days of your adult life! That is why I write with urgency to make smart financial choices now, when pressures could influence one to think waiting will not injure the future.
As a point of reference, consider the case of a recent graduate choosing to begin now saving $3000 ($250 per month) annually. Were someone to enroll, and annually fund, two units in the Christian Churches Pension Plan on their 24th birthday, their lifetime monthly pension income at age 65 would be $1640. This would require $125 per month. Were they to invest the remaining $125 per month in a mutual fund averaging a 7.5% annual return over their lifetime, their fund value would be nearly $400,000 at age 65. Those savings values can grow by incrementally increasing the monthly savings amounts over the years!
Waiting is an expensive decision. Delaying this hypothetical plan by only five years reduces the future values significantly. Beginning on the 29th birthday would reduce the lifetime monthly pension by $200 per month ($1440 per month). The value of hypothetical savings would be $260,000, a considerable reduction indeed.
It is Mid-May. The pressures faced by recent graduates are significant. However, there is also no time like the present to begin preparing for the future. Small decisions today, have the potential of reducing our regrets later in life.