When students come into my classroom each morning, I'm focused on the here and now, not dreaming about what I'll be doing in 30 years. But, I am already planning for retirement. I realized that I wouldn't be riding off into the sunset later if I didn't start planning now. And I found out that I didn't need a finance degree to build a nest egg. I used the following tips from Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF). Try them yourself-and I'll see you in Aruba in 30 years.
- Say "Yes!" to free money. If you are employed by a school that offers a pension plan, make it your number-one priority to contribute to it-especially if your employer matches some or all of your contributions. If you don't contribute, you're turning down free money. Sign up today!
- Get with a program. If your employer doesn't provide a pension plan, it doesn't mean you have an excuse not to put money away. It's imperative you save on your own.
- Pay yourself first. You owe yourself. Contribute as much to a retirement plan as you can. And do so on a regular basis. A good way to start is to save all or part of your next raise-it's money that you're not used to spending, so you won't miss it.
- Do not pass "go," save with before-tax dollars. When you build retirement savings with before-tax dollars, Uncle Sam can't tax that money until you start drawing benefits. By that time, your savings will have grown, so the dent in your pocketbook will be comparatively smaller.
- Never underestimate the power of compounding. The sooner you start to save, the harder compounding will work for you. Here's an eye-opening example: From age 31 to 65, if you set aside $2,000 per year at a 7 percent rate of return, you would compound $276,474. But, had you started saving ten years earlier, at age 21, you would have stashed away more than double that-$571,499.
- Diversify! Don't put all your eggs in one basket. Spread your retirement savings among several types of investments-such as stocks, bonds, and real estateand diversify within each type.
- Think long-term. Don't react to short-term market swings, or you'll wind up buying high and selling low-and that doesn't spell saving. If you invest over the long-term, you'll have time to ride out ups and downs.
- Balance risk with reward. The higher the risk, the higher the potential return. Take some risk-a return that isn't beating inflation means you're losing money. But, because retirement funds are crucial to financial security, exercise prudence.
- Be "hands-off." If you take out a loan from your plan, pay it back. If you switch jobs, resist cashing out. If you won't be penalized and get good returns, consider leaving your money in your former plan. Otherwise, roll it over into an individual retirement account (IRA) or your new employer's plan.
VALIC (The Variable Annuity Life Insurance Co.)