Yet, even though it might seem out of place at this moment in time, this column is for you, 2020 graduates.
In the months and years to come, when we get through all of this, my hope is some of what I have to say here will linger with you.
The silenced strains of the Pomp and Circumstance march at colleges and universities across the country is such a loss for all of you, and, of course, for your parents, who are bursting with pride for your accomplishment.
So with compassion, humility and your understanding, here are some thoughts I would have doled to you if I had been asked to speak at your graduation.
For many women (and men) in their 20s, saving for retirement doesn’t carry a great deal of urgency.
I get it.
When I was your age, it was not on my radar and seemed so far in the future that it felt pointless.
To be fair, during my initial working years, I didn’t have access to an employer-based retirement plan. I was a freelancer for many publications.
When I was 25, I landed a job at Forbes magazine and was offered the opportunity to contribute to a 401(k) plan. At the urging of my dad, I did, and set up automatic contributions from my paycheck.
Five years later, when I was changing jobs, I cashed it out, paid the taxes and penalty and didn’t look back — for decades. I needed the money I figured, right then.
Today, I honestly don’t recall what it was used for. What I do know, somewhat painfully, is that after years of compounding, it would have amounted to a decent chunk of change.
Many of you are launching careers and faced with the task of finding work during this time of massive unemployment and layoffs, and yes, rescinded job offers. This concerns me deeply. If you aren’t earning an income, you can’t save, and that can drastically impact your future financial security.
Even if retirement savings is truly the last thing on your mind right now, it matters, a lot. Trust me.
Particularly hard hit by today’s tough job market are women between the ages of 20 and 24. The unemployment rate in April for women 20 to 24 was 28%, nearly five points higher than their male counterparts. (Note: May numbers will be released June 8.)
And those of you who do find work may be very well be hired as contractors, as I was in my early years of working.
Contract work will be the name of the game moving in the aftermath of COVID-19 work-from-home mandates and the economic blow to many employers. Companies in the months, and I dare say, years ahead, will choose to work with sparer teams and reassess their budgets. The gist: they will hire more contract, often remote workers, and fewer full-time workers.
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If you accept a contract job, or gig work, you will have fewer, if any, employer benefits, including employer-sponsored retirement plans.
“Workers across generations are at risk of not achieving a financially secure retirement — an issue of major concern long before the coronavirus pandemic,” said Catherine Collinson, chief executive and president of Transamerica Institute and the nonprofit Transamerica Center for Retirement Studies, in a press release for the new study Retirement Security Amid COVID-19: The Outlook of Three Generations.
“The long-term implications of the coronavirus pandemic and recession on retirement security have yet to be fully realized,” Collinson said.
And, sadly, a troubling finding from the report in regards to younger workers who do already have retirement savings accounts: As a result of the coronavirus pandemic, one in three millennial workers (33%) have and/or plan to dip into their retirement accounts, including 22% who have already taken a loan and/or early withdrawal, and 20% who plan to do so.
By comparison, only 15% of Generation X and 10% of baby boomer workers have already done so and/or plan to do so.
Retirement saving is nonnegotiable, so it’s essential that you find ways to make saving and investing a priority and refrain from dipping into the bucket once you get going, as I did.
It all begins with your first job post-graduation.
Look at saving as making an investment in your future self. It’s self-care. You’re saving for “living,” not “retirement.” To me, that’s a better way to frame it, especially when retirement is a fuzzy concept at best.
So in the spirit of graduation bon mots, here are some suggestions for you to consider as you embark on your careers.
Ramp up your financial knowledge. Saving is a habit that must start in your 20s. If you don’t feel confident in investing, knowledge can ease that anxiety.
Three books to consider: “Get a Financial Life: Personal Finance in Your Twenties and Thirties” by Beth Kobliner, “Broke Millennial: Stop Scraping By and Get Your Financial Life Together” by Erin Lowry and “How to Think About Money” by Jonathan Clements.
Contribute to a Roth IRA. You can sock away up to $6,000 this year in a Roth account. You contribute after-tax dollars, your money grows tax-free, and you can generally make tax- and penalty-free withdrawals after age 59½. I know, decades from now. But hear me out.
You can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. However, you may have to pay taxes and penalties on earnings in your Roth IRA.
In general, withdrawals must be taken after a five-year holding period. There are exceptions to the early withdrawal penalty, such as a first-time home purchase, college expenses, and birth or adoption expenses. You can also use the withdrawal to pay for unreimbursed medical expenses or health insurance if you’re unemployed.
Automate savings. If you find a contract position, schedule an automatic transfer from your checking (where your new paycheck will land) into a retirement savings account each month. Even $100 a month invested in a retirement account creates a habit. It is possible to find accounts that don’t have a minimum investment requirement. You can increase it as your income ratchets up. Ideally, you want to save at least 15% of gross income for retirement. That said, start with whatever you can squeeze out of your budget.
Negotiate for higher pay. If you’re offered a full-time position, your starting salary matters. It sets your base pay scale moving forward as you change jobs, or get promoted. And it impacts the amount you can set aside in an employer-provided retirement plan and your employer match. Most employers require workers to save from 4% to 6% of pay to get the maximum match.
Learning to ask for more can take practice. To help women improve salary negotiation skills, for example, the American Association of University Women offers a free course.
Now I will get take off my money hat and share a few things that have made my life richer. I wish I had known these when I graduated from Duke University 38 years ago.
• Celebrate other people. Find ways to be happy for other people, to lift others up.
• Care about something. Wear it on your sleeve. Act to make the world better. To uncover what matters to you, keep a journal of the things you spend time doing and thinking about each day and what energizes you.
• Be on board with change. Life will whack you off course from time to time. Often that’s where the magic happens. You might not grasp it at the time, but when you look back, you will.
• Stay curious. Never stop learning new things and taking chances.
• Find mentors and sponsors. Show vulnerability. Ask for advice. Listen. Accept criticism. Build bonds. Strength comes from having people who are invested in your success and can help you see what you can’t. (They benefit, too. There’s joy in helping someone along their path. It’s human nature.) Interactions with others, even virtual ones, can get you unstuck and make you feel that someone notices you and your work. You feel valued.
• Build an optimistic attitude. A daily gratitude list really does help. A can-do approach allows you to see possibilities and solutions and how “you can” bring about positive change in your life, not focus on how “you can’t” In my opinion, optimistic people tend to succeed in work and life because they’re willing to take risks. They aren’t afraid to fail because they know they will find a way to make it work and are willing to be patient and wait for it all to play out. They chip away at whatever the issue may be with the confidence that, in the end, things will improve.
Finally, laugh out loud, dance — and, as my dad, always told me: “You have to dream to get there.”
Kerry Hannon is a leading expert and strategist on work and jobs, entrepreneurship, personal finance and retirement. Kerry is the author of more than a dozen books, including “Great Pajama Jobs: Your Complete Guide to Working From Home,” “Never Too Old To Get Rich: The Entrepreneurs Guide To Starting a Business Mid-Life,” “Great Jobs for Everyone 50+,” and “Money Confidence.” Follow her on Twitter @kerryhannon.