Finance professionals discuss retirement options for millennials

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Paul Conrad helps students have a clearer vision about their financial present and future. (Natalie Stoker)

The question of what will happen once they retire does not come up often for many young people. Resources on and off campus can guide students on the path to a more secure future.

Jim Brau, the Joel C. Peterson finance professor in the Marriott School of Business Management at BYU, said most companies nowadays don’t offer retirement plans. One main reason is people are living longer due to current medical advances.

Longer lifespans make retirement plans unviable for most businesses to offer because of the differences in costs. Now the risk is shifting from burdening employers to employees. Employees have to consider whether investments will pay off or not.

Retirement plans have been replaced with 401k plans and other similar contribution benefits plans.

One big problem millennials face is not knowing much about these plans. Most companies give new hires options on how to invest this money.

Recent BYU graduate Julia Tyler said she felt overwhelmed when she first got hired. The human resources department at her new full-time job sent her a package asking what kind of medical and dental insurance she wanted. It also asked her to choose a 401k plan.

“I wasn’t prepared to choose from the options that they were offering. For a week I felt lost,” she said. “When I asked my co-workers about this, their answers would be very vague; I think that they didn’t know about it either.”

Millennials might rely on 401k plans for retirement. If they do not choose a good program, they could be worse off in the long run.

Brau and other professors teach finance class FIN 200. Brau said students who take it “go through a personal finance boot camp. They learn about 401ks and their other investment options.” He said other classes also teach this.

“I absolutely encourage everybody to take the personal finance class (FIN 200) or the family finance class (SFL 260),” he said.

Tyler said she wished these finance classes where better promoted on campus. She said she graduated from BYU without ever taking a finance class because it wasn’t required for her major.

“I wish that I would have taken a class that taught these financial skills, but the finance classes that I knew about seemed to be too business-major oriented,” Tyler said.

Paul Conrad is the manager of the BYU Student Center for Financial Management & Planning. He described his job as helping students develop good financial skills and help them make good decisions while in college.

“One thing that is significant is that millennials are graduating into a world where they are going to be much more responsible for their own financial well-being,” Conrad said.

He said there aren’t many opportunities employees have to choose the kind of employer benefits they want. He said a good place and time to ask about the retirement plan and other employer benefits is the job interview.

“What most people negotiate is the starting salary,” Conrad said. “In the big picture, in some cases, you may be better off taking the job that pays a little less, but offers better benefits.”

Conrad hopes students will learn more about employer benefits.

“We aren’t trying to make you a financial expert,” he said. “We are trying to educate you enough so you can interact intelligently with financial experts, and ask the right questions about these benefits.”

Many financial workshops on campus teach students about retirement plans and other employee benefits. It’s never too early to think about retirement, but students can use time to their advantage.

Brau discussed the power of compound interest when it comes to saving money.

“The power of compound interest is incredible,” he said. “If you start saving when you’re 25, you have to save a fraction compared to if you start saving when you’re 40.”

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