Schenk's advice to grads on MSN: Start saving early
MADISON, Wis. (5/27/15)--While students accumulate significant debt in pursuing an education, a college degree still provides a lifetime of benefits--especially if the degree-holder has a proactive saving plan, Mike Schenk, CUNA vice president of economics and statistics, recently told MSN.
Despite a low overall unemployment rate, the class of 2015 faces challenges in joining the labor market, MSN reported in the article, “What 14% unemployment means for the class of 2015.” According to Generation Opportunity, a national, nonpartisan youth advocacy organization in Washington, D.C., the effective unemployment rate for 18- to 29-year-olds in April was 13.8%.
And those graduating with bachelor's degrees are leaving school with an average of $33,000 in student loan debt. “Obviously students are paying way more and amassing massive levels of debt while their earnings have remained relatively flat over the last few years,” Schenk told MSN. “Having said that, educational attainment is really important and more education is associated with positive outcomes.”
A key to creating a positive outcome is saving, Schenk said. Federal Reserve data show that only half of public has a retirement account outside of Social Security. The median value of those accounts is $50,000, as economic hardship has required college graduates to wait a while before entering the job market or accept underemployment for long periods and put off their retirement savings.
“From a savings perspective, one of the most powerful financial decisions younger people make is when to contribute to a retirement plan and how much to contribute,” Schenk said. “The sooner you can contribute and the more you can contribute, the better off you are, but because of these trends among young people the retirement window has shortened.”
To illustrate this point, Schenk notes that a worker who puts off saving until age 35 would have to put away 16% of income annually to make the same amount of income at age 65 as someone who started putting 10% away at age 30. Meanwhile, if that same worker waits until age 40, he or she would have to save roughly 26% of income each year to reach that same level.