Welcome to College: Now, Start Saving for Retirement

Americans are horrible at saving. We are the worst savers in the world, or at least the industrialized world. On average, Americans save something like four percent of their income. Four percent. The Japanese save something like sixteen percent. As a rule Americans also buy more stuff on credit than people in other nations, mainly because we have no savings. So, we don’t save and then we spend more money than we have on things we often don’t need. This is not a recipe for success in the 21st century. As you know, the democratization of finance has made you more responsible for your financial well being than the average person in the 20th century ever was. In the 20th century it was common for someone to have one job his or her entire life. One employer and one pension managed by that employer makes things pretty simple. But as you know, that probably won’t be the case for you. Now, if you are fortunate, you may only have employers who allow you to move your retirement plan with you. That would be nice but it still won’t be enough. If you want to live well or decently in your twilight years you are going to have to start saving.

How much should you save? I have a simple rule for this that will make saving very easy. You should save as much as humanly possible. If you really want to gain wealth as you progress through life (and why wouldn’t you?), you need to pay off all your debt and save as much as possible. Remember in grade school when they went on about Benjamin Franklin and “a penny saved is a penny earned?” This adage by the roguish founding father has endured even globalization. Let me add to it though. It’s my nod for immortality: a penny saved for retirement should be put in a Roth IRA. What d’ya think?