May 11, 2010

The Nation’s Third Oldest College Newspaper

Volume 80, Issue 15

Career and investing strategies worth noting

Photo courtesy of Jonathan Mcintosh

Photo courtesy of Jonathan Mcintosh

The month of May has finally arrived, and as graduates finish this sector of their lives and begin a new one, many are still unsure as to what field they really want to pursue. While it is true that a small group of students actually pursue the career they've always dreamed of, most students do not. In fact, I've considered engineering, marketing and accounting. I've even worked in some of those fields, but I truly feel at "home" when it comes to finance.

There isn't anything wrong with switching careers in order to find the one in which we feel we can make a difference in because most of us are relatively young and we have enough time to make adjustments and to make money. However, the biggest mistake I see recent graduates make is that they'll take a job in a field that they don't even like simply because of the salary and benefits.

While I understand that we all have to make a living in order to support ourselves and our families, what good is a large salary if we're miserable every day we get up and go to work? If you do that, you'll notice that both your family and social life and possibly even your health can be negatively affected. State differently, taking a low paying job with a company you would like to establish a career with might make more sense than taking a job you have no interest in.

All I'm asking is for you to reflect on all of your experiences here at Niagara University, and the jobs you may have held in the past, and really try to figure out what it is that you would like to do for the rest of your life. And, you won't figure it out overnight but you've learned a great deal about yourselves during your time here at Niagara University.

In my opinion, there are possibilities even in this type of economy. And, if you are considering a job opportunity, please make a business decision, instead of an emotional decision. What I mean by that is to not fall prey to only considering the base salary. Consider the entire compensation package- work schedule, bonuses, health insurance, retirement accounts and other perks.

This brings me to the subject of retirement plans. Did you know that many people do not start investing into a retirement account until age 40 or 50? Being young not only allows us to explore different careers and to make money but also enables us to have more money during retirement if we start now. If you start a retirement account at age 22, and invest $250 per month, given average annual rates of return, you'll have over one million dollars by age 62. But, if you wait until age 50 to invest that same $250 per month, you'll only have $66,000 by age 62. Big difference right?

Professor Ed Hutton, finance instructor and the financial services lab director, explains: "The investor who starts earlier will essentially have a larger value because of the concept of compounding."

What should your action plan be? Invest now, and know everything about the retirement plan offered by your employer. You need to know if it's a: 401(k), 403(b), TSA or TSP. Most companies offer a 401(k) plan; non-profits offer 403(b) plans, which are essentially the same as a 401(k) plan. Public employees typically invest in a tax sheltered annuity (TSA) and members of the military invest in a thrift savings plans (TSP). Some employers (i.e., Google) are now offering a ROTH 401(k) plan.

Does your employer match? If yes, invest up until the point of the match. Then, if you want to invest more money for retirement, consider an individual retirement account (IRA) and/or a ROTH IRA through a brokerage firm. You will have a slew of different investment options within an IRA/ROTH, in comparison with plans offered by employers.

With a ROTH, you invest with after-tax dollars, and then during retirement you receive your money tax free, which is a huge advantage. You'll pay the taxes upfront, but as with most things in life, it's not where you start, it's where you finish.

With employer retirement plans, along with traditional IRAs, you will pay ordinary income tax on your withdrawals during retirement. However, Hutton advises: "Even though we are currently in the lowest income tax brackets, if you believe you will be in a lower income tax bracket during retirement, a traditional IRA may be suited for you."

And, another benefit of a ROTH IRA is that you can withdraw any amount of your original contributions at any time without taxes or penalty. It's only the growth that you have to wait until the account has been opened for at least five years or until you're at least 59½ years of age, whichever comes first. Thus, a ROTH could also serve as an emergency fund. With a traditional IRA, despite the tax deductions, expect to pay income taxes on the withdrawals as well as a 10 percent penalty if you're not at least 59½ years of age.

Enough about retirement plans. As another incentive for you to save for retirement, last year's trustees report said the Social Security trust fund would be depleted by 2041. So, you can't rely on Social Security for retirement. And, within the wonderful world of student loans, the interest rates are reset every year on July 1 based on the rate of the 91-day T-bill. This year, if you consolidate before July 1, you can consolidate your federal loans and essentially lock into a low rate of 2.875 percent. You can't afford to miss out. Consolidate now, even if you are still enrolled in classes.

As graduates of Niagara University, I am confident that you all will prove to be an asset to any company you join. But, remember what I said earlier. I want you to only work for a company in which you want to establish a career with, and it should be something you feel passionate about. Once you accept a position, establish yourself as the greatest employee your company has ever seen bar none. I guarantee you that you will get noticed, and then the money and promotions will follow with continued hard work.

Lastly, invest in your retirement plans now in order to enjoy the benefits of not only having more money during your golden years, but also to be able to retire sooner.

Make this esteemed university proud.

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