Sophomore Nick DeSutter began investing for his retirement when he was 16. He saved $10 each month, and the business entrepreneurship major said he now puts aside $100 or more monthly.
An employee of the Virginia B. Ball Center for Creative Inquiry, DeSutter said he does not earn higher wages than the typical college student. He does, however, believe students should begin investing in their retirements now.
"People need to start investing as soon as possible," he said, emphasizing that compounding interest causes investments to grow steadily over extended periods of time. "It could be $5 a month. It really doesn't matter. What matters is that you get started and you're aware of what needs to be done."
Retirement investments have become an issue of national concern since President George W. Bush proposed the privatization of some Social Security tax money. Addressing concerns that Social Security funds could be depleted in the next 40 years, Bush's plan would allow workers to save a portion of their Social Security tax payments in private accounts.
Because of the declining U.S. dollar, combined with the baby-boomer generation's entry into retirement, living solely on Social Security will be difficult for future retirees, Gary Santoni, an emeritus professor of economics, said. College-age people today will likely have to make their own efforts to save to live comfortably during their retirement, he said.
"You have to be willing to bite that bullet and just do it," Santoni said, encouraging early investment in diversified accounts. Stock mutual funds, he said, yield considerably higher returns than savings accounts, savings bonds or money market accounts.
"The sooner you put it aside and save, the better off you're going to be," he said.
DeSutter said he is investing his money in a number of ways, including in an Individual Retirement Account, stocks, annuities and savings bonds. He said that aggressively investing now in riskier areas, such as the stock market, and devoting more money toward safer investments, such as bonds and annuities, later in their careers is likely to benefit students the most.
"You can't afford to take risks later in life because you can't recover," he said.
Randy Price, a certified financial planner at Muncie's Price Asset Management, said he believes students should invest now, but they should take a cautious approach to saving for retirement.
"I think the trend, especially among the investment professionals, is to vastly understate risk," he said. Secure, guaranteed assets, such as money market accounts and government bonds, are the types of investments he said college students should look to first.
He recommended that students avoid credit card solicitations and borrow money as little as possible.
"If what you're doing is getting a student loan because you want a little nicer car or a new stereo or a big-screen TV, that's not a very good idea," he said.
Price stressed the importance of protecting oneself by purchasing insurance plans. Disability insurance, life insurance and umbrella plans to protect motorists from uninsured drivers are all methods Price suggested to steer clear of financial risk.
"Don't overestimate your knowledge and ability to do your own finances," Price said, advising that students take business and economics classes or work with a financial planner.
Parents and other trusted relatives who have had experience in saving and investing are another source of guidance in financial planning, Santoni said.
DeSutter once served as the treasurer for the Financial Management Student Association, a group composed of several business and finance students who offer free information and advice about financing to other students. He said that to live comfortably, a retiree needs a retirement account worth $1 million. DeSutter's goal is to have a $5 million retirement investment by the time he reaches age 65.
"I like to think of myself as on top of this game right now," DeSutter said. "That doesn't mean I can't get burned at some point, but right now I feel like I'm on top of it and I'm doing pretty good for a 23-year-old."
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