Cost of Waiting: Why College Grads Should Start Saving for Retirement Now

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TD Ameritrade Offers College Graduates 5 Tips to Help Save for the Future

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The Power of Compounding

Simple steps, like investing early can help new grads take advantage of the power of compounding, and ultimately enjoy more freedom and flexibility later in life.

More than half of Gen Y say they plan to retire on schedule - yet 48 percent are no longer saving, 33 percent have stopped saving for retirement and 27 percent are piling on credit card debt. This is according to the latest Investor Index survey released by TD Ameritrade Holding Corporation (NASDAQ: AMTD).

Given the challenging job market greeting 20-somethings as they accept their diplomas, saving for retirement may be the last thing on their minds – when it should be one of the first. Why? Starting now can allow young professionals to pad their growing nest eggs with the power of compounding interest. Here’s how:

  • A new grad starts investing $100 per month, beginning at age 21, and continues that monthly investment for the next 20 years, stopping at age 41. The total investment before interest is $24,000.
  • Assuming a modest 8 percent annual return, compounded monthly, that $24,000 will become $471,358 by the time the grad retires at age 67.

Likewise, starting late could cost thousands – or even hundreds of thousands – of dollars.

Here’s how:

  • A new grad waits until age 41 to begin investing $100 per month and continues that monthly investment for the next 20 years, stopping at age 61. The total investment before interest is again $24,000.
  • However, assuming the same 8 percent annual return, compounded monthly, the nest egg will only total $59,295 by age 67.

In this case – getting a late start cost the grad more than $412,000.

“The truth is cutting savings in favor of more spending and more debt could derail retirement for Gen Y, but it doesn’t take much to get back on track,” said Stuart Rubinstein, managing director of online engagement at TD Ameritrade, Inc. (“TD Ameritrade”), a broker dealer subsidiary of TD Ameritrade Holding Corporation. “Ask yourself whether you would rather invest $100 a month - one gourmet coffee per day – at 21, or $1,000 a month at 41. Simple steps, like investing early can help new grads take advantage of the power of compounding, and ultimately enjoy more freedom and flexibility later in life.”    

So how can today’s graduates get a head start on retirement? Rubinstein offers the
following five tips:

1. Save Regularly – It’s never too early to start. As soon as you start receiving a paycheck, save a portion of it regularly, even if the amount is minimal. Compounded over time, the savings will add up and come in handy for major purchases, such as a new car, a down payment on a home or a deposit on a first apartment.

2. Establish a Budget – Track your monthly income and expenses, both the “needs” and “wants,” and plan accordingly. This will show what you can realistically afford and help you avoid racking up credit card debt.

3. Take advantage of employer-sponsored plans such as a 401(k) - These employer-sponsored retirement plans deduct money from your paycheck, before taxes, and make investing easier. Many employers also offer programs that match some of your contributions, so take an interest and ask.

4. Continue your education – You don’t have to go back to school, but educating yourself on money trends will help you become more financially savvy over time. Subscribe to a financial magazine or podcast, visit a financial Web site, or follow a credible financial blog.

5. Make a financial plan – Determine your long-term goals and use a free calculator like Wealthruler™ to help assess your financial situation and develop an action plan to pursue your goals.

TD Ameritrade's free Cost of Waiting Calculator and Retirement Center offer tools and resources that can help graduates estimate the costs of delaying retirement saving.

For more information on TD Ameritrade’s Annual Investor Index survey series, including key findings, visit

Survey Methodology
These results are based on a survey conducted by Maritz, Inc. on behalf of TD Ameritrade Holding Corporation. One thousand seven (1,007) adults between 22 and 81 years participated in a telephone survey from March 23 through April 11, 2011. The margin of error in this survey is ±3.1%. This means that in 19 cases out of 20, survey results based on 1,007 respondents will differ by no more than 3.1 percentage points in either direction from what would have been obtained by seeking the opinions of all adults living in the United States age 22 through 81. Maritz, Inc. and TD Ameritrade Holding Corporation are separate, unaffiliated companies and are not responsible for each other's products and services.

Generations defined as: Mature: born 1930-1945; Boomer: born 1946-1964; Gen X: born 1965-1976; and Gen Y: born 1977-1989.

About Maritz
St. Louis-based Maritz is a sales and marketing services company, which helps companies achieve their full potential through understanding, enabling, and motivating employees, channel partners, and customers. Maritz provides market and customer research, communications, learning solutions, incentive initiatives, rewards and recognition, effective meeting, event and incentive travel management services, and customer loyalty programs. For more information, visit or contact us at 1-877-4MARITZ.

About TD Ameritrade Holding Corporation
For more than 36 years, TD Ameritrade Holding Corporation (NASDAQ: AMTD) has been in the business of serving individual investors – either directly or through a network of independent registered investment advisors. Through its brokerage1 and education2 subsidiaries, TD Ameritrade combines innovative trading technology, easy-to-use trading tools, investment services and education, and superior client service to create a market-leading financial services experience. Home to Kiplinger's #1 online broker3 and Barron’s #1 online broker for “Options Traders,”4 TD Ameritrade provides millions of retail investors, traders and independent registered investment advisors with the tools, service and support they need to help build confidence in today's rapidly changing market environment. For more information and resources for journalists, please visit the TD Ameritrade newsroom at
1 TD Ameritrade, Inc., member FINRA ( /SIPC ( /NFA (, and TD Ameritrade Clearing, Inc., member FINRA/SIPC.
2 Investools, Inc. is an education subsidiary of TD Ameritrade Holding Corporation. Investools, Inc. does not provide financial advice and is not in the business of transacting trades. Investools, Inc. and TD Ameritrade, Inc. are separate but affiliated companies that are not responsible for each other's services or policies.
3TD Ameritrade was ranked #1 and received an overall score of 5 stars (tied for first place with one other broker), in the Kiplinger's Online Broker Ratings, Kiplinger's Personal Finance, 02/2011. Fourteen brokers were rated in the categories: Costs, Web site usability, Investment choices, Customer service, and Research and tools.
4TD Ameritrade was awarded an overall 4½ out of 5 stars and was named "Best for Option Traders" in Barron's 2011 Online Broker Survey, 03/2011. TD Ameritrade also received the highest rating, 4½ out of 5 stars, in the "Best for Long-term Investing" category, sharing that rating with only one other broker. TD Ameritrade was evaluated versus 23 other online brokers in eight total categories, including trade experience, trading technology, usability, range of offerings, research amenities, portfolio analysis and reporting, customer service and education and costs. Barron's is a registered trademark of Dow Jones & Company © 2006-2011.


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