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Saving Your Summer Cash for Retirement

Published on September 18, 2014

How soon is too soon to start saving for retirement? You could tell your teenager who is finishing up a summer job that they should start saving now, and they may not listen. But, here’s something they might listen to: if they contribute the maximum amount to a Roth IRA now (at age 19), by the time they are ready for retirement (at age 67) they will have accumulated about $330,000 more than someone who begins contributing at age 25.

Q. What’s the difference?
A. Basic compounding.

Do the Math! An Early Start Pays Off Big Time!

It’s a no-brainer. Let your kids do the math. If they start now, or ask for help from you, their grandparents or anyone else who will listen, it will pay off in big money over time.
Giving your teenager a gentle nudge will put them on the right track (and in the right frame of mind) to continue to grow their retirement savings. Waiting until after college to initiate retirement savings is unwise—your teenager can reap huge benefits later by starting earlier.

If that doesn’t motivate your teenager, maybe these truths will:

According to the U.S. Centers for Disease Control and Prevention, the U.S. life expectancy (at birth) is 77.9 years and rising. Any guesses on how much retirement will cost the youth of America when they are ready to retire?
Right now, Americans are concerned about Social Security. Who knows what governmental programs will be in place when your teenager is ready to retire decades from now?

When it comes to retirement planning, most of us are on our own. These days many jobs do not come with pensions. And, most of us unfortunately won’t have our parents around to catch us when we’re ready to retire.

Retirement is the one thing you can’t finance but you can plan for it. And, as parents, we can teach our children well by planning ahead.

It’s Never Too Early to Start Planning and Saving

What can your teenager do now? By using their time wisely, teenagers can start funding a retirement plan with as much monies as possible.

For those budding investors (or their parents) who understand alternative investment options, a self-directed IRA can be a great way to build up their nest egg more aggressively. Self-direction allows individuals to invest in what they already know and understand—both traditional and nontraditional assets—and they make all their own investment decisions. Self-directed retirement plans may include real estate, mortgages and other loans (such as lending tuition money to a friend and getting it back with interest), private hedge funds, precious metals, and much more.

The self-directed IRA administrator, like Next Generation Trust Services, handles all the details of the transactions and holds the assets.

Next Generation Trust Services Can Answer All Your Self-Directed Retirement Plan Questions

At Next Generation, our professionals are available to answer questions you or your teenager may have about self-directed retirement plans and our transaction specialists ensure that investments are within IRS guidelines. Since we do not give investment advice, we strongly recommend you consult your trusted financial advisors about your investments and any tax implications they have for your unique situation.