Key information to understand retirement savings

Lorna Wounded Head is the Family Resource Management Field Specialist at SDSU.

Lorna Wounded Head is the Family Resource Management Field Specialist at SDSU.

Lorna Saboe-Wounded Head, Family Resource Management Field Specialist, SDSU Extension

You have not finished college, so why do you need to learn anything about retirement? Understanding key terms about retirement planning will help you make decisions once you do graduate.

Compounding interest will make $500 saved now mean much more than $5,000 20 years from now. Retirement savings is not as simple as putting money in a bank and forgetting about it. Below are two terms related to workplace retirement.

401(k) – This is likely a term that a Human Resources manager will mention when you get hired.

Very simply, a 401(k) is a retirement account you can put money into to use after you turn 59.5. If a company provides a 401(k), they will often provide a match – they will put in the same amount of money as you up to a certain percent, effectively raising how much you get paid.

Target, Walmart, Sam’s Club and likely many other companies offer these to employees, even if they are not full time.

Vested – You always get to keep the money you put into a 401(k), regardless of whether you leave the company or not. That money is yours. However, the money the company matches is not yours to keep until you are vested.

That simply means that until you have been with, the company for a year, five, or 10, you will not get all the money the company matched.

For some companies, they may have you partially vested at 50% when you reach a year, and then you get fully vested at the three-year mark.

The earlier you start, the less money you have to put in to reach the same goal. It is often a small percentage of your paycheck (under 6%) and comes out automatically. The easiest money to save is the money you forget that you have to spend.

Retirement is scary, and seems way too far off to worry about right now, but a simple form to sign up that takes five minutes could get you a lot of money out of the deal if you are willing to look into it.