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Never too early to plan for retirement’ says Ohio State professor

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When it comes to a college student’s personal finances, some people first think of student loans, credit card debt or rising tuition. The last thing they worry about is planning for retirement.
Sherman Hanna, an OSU professor of consumer sciences, said in an email that a 2007 survey of 4,418 households, sponsored by the Federal Reserve Board, provided statistics of young adults’ preparedness for retirement.
“(Fifty one percent of) young respondents were unrealistic in planning to retire before the age of 62,” Hanna said.
Catherine Montalto, OSU associate professor of consumer sciences, said students should think about retirement.
“It’s never too early to plan for retirement,” she said. “It’s good if you can begin to learn what your options are for saving.”
Montalto said students should understand how retirement works so they can ask good questions to their future employers.
“It’s more than just a salary,” Montalto said.   
Montalto said it’s never too early to start saving for retirement.
“The question is can you sneak out three dollars a day to save?” she said. “Students have to make that decision.”
If 20-year-old students can save $1,000 annually at a 5 percent compound interest rate, they will have more than $120,000 by the time they are 60, Montalto said, adding that if students started saving at 25, they would only save more than $90,000.
Students can receive help with their finances through the university. The Student Wellness Center provides services like financial coaching for students trying to sort out their finances.
Bryan Ashton, the program coordinator for Financial Wellness at the Wellness Center, said for the last three years Scarlet and Gray Financial Coaching has averaged an attendance of 244 students in one-on-one coaching sessions, with more than 5,000 students through presentations and other educational means.
Even if students are working at part-time jobs, they should ask about retirement options, Montalto said, because employers might have retirement plans that can still be used even if the student left the job.
While employer retirement plans are the most common, Montalto said students can also invest their retirement savings in stocks and mutual funds, which are riskier options.
Students can start with these options, and when they get closer to retirement, change to less risky options such as credit deposits and personal savings, she said.
Montalto also said students can set up their own individual retirement account, known as an IRA, which they can contribute to as well.
According to the Federal Reserve Board survey, “about 14 percent of those under 25 had (an) Individual Retirement Plan and 12 percent had an employer sponsored defined contribution (such as 401(k) plan),” Hanna said.
However, Hanna said student loan debt should be a priority. “I would say that unless a parent or grandparent is putting up the money, most need to think more about paying for college and then paying off student loans,” he said.
Montalto said student loan debt has exceeded more than $1 trillion, which is greater than credit card debt.
Some students, such as Kyle Barger, a second-year in political science, think planning for retirement while in college is a good idea because of the economy.
“It’s probably a good idea to start saving for retirement. A lot of college graduates aren’t able to hold jobs for a long period of time,” Barger said. “It’s a long time before I start thinking about it (personally).”
However, some students such Zhan Peng, a third-year in mathematics, economics and statistics, think it’s too soon for retirement.
“Young people have a lot of chances before their retirement,” Peng said.

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