Graduation diploma

Transitioning from college to 401(k)

It’s that time of year for caps, gowns and new beginnings.

A lot of us have clients with children graduating from college and preparing to leave the nest. As a retirement specialist, there’s one big mistake I see these 20-somethings typically make as they enter the workforce. They assume other financial goals – like going on vacation or saving for a house – take precedence over retirement, and they don’t start immediately contributing to a retirement plan because it seems “too far off.”

They could not be more wrong.

I learned the power of compounding early; the idea that putting away money sooner in life would allow more time for it to grow. My final presentation in my college public speaking class was about saving for retirement, and my very first paycheck out of school included a contribution to my new employer’s 401(k).

Other personal finance concepts, however, proved to be a complete learning curve during that period of my life. Financial advisors have an opportunity to help clients steer their graduates in the right direction from day one. Here are some tips I like to provide during these conversations.

1. Pay yourself first.

When setting up direct deposit with an employer, perhaps send a certain percentage of each paycheck to a savings account, then learn to live on what is left. This habit will start a college grad’s financial life off in a position of strength.

2. Start investing in a 401(k) as soon as possible.

This is one of the most important steps a newly employed 20-something can make to start saving early. Not only is a 401(k) automatic and takes the decision process out of saving money, which allows employees to accumulate effortlessly, but employers may offer matching dollars. Declining that option is basically leaving money on the table.

3. You don’t have to choose.

Saving for a vacation or a home can be done in tandem with having a retirement plan, and it’s never too early to seek assistance from financial advisors who can help build a comprehensive savings strategy for a recent college grad (a financial plan makes a great graduation gift!).

The financial choices these 20-somethings make early on will give them independence and options down the road. When we guide our clients on how to talk with their adult children about the time value of money, we empower them to help their graduates make the best decisions for their futures. After all, time is something we can never get back.

Join me in wishing the class of 2019 the best of luck as they start their new journeys!

Charlotte Geletka

Charlotte C. Geletka

Charlotte is the managing partner of Silver Penny Financial, in Atlanta, Georgia. As a financial coach and retirement specialist, she is committed to helping her clients get to a point where they can stop worrying about their financial future. Charlotte has been serving people at Lincoln Financial Group since 2004, when she started working with college professors in Raleigh, North Carolina. She holds the following licenses and professional designations: Chartered Retirement Planning Counselor SM from the College for Financial Planning®; Investment Adviser Representative (Series 65 – Uniform Investment Adviser Law Exam); General Securities Representative (Series 7 – General Securities Representative Exam); Uniform Securities Agent (Series 63 – Uniform Securities Agent State Law Exam); and Life, Health, and Annuity Insurance Agent.