"Honestly we're recently out of our 20s, early 30s and retirement to us is so far away we really haven't given it that much attention," Cliff Burnham said.
Cliff and Toni Burnham represent a typical young American couple. They graduated from college with thousands of dollars worth of credit card debt. They tightened their belts and paid it off. Financial adviser Tony Walker is a financial advisor who says that is just the first step toward a solid financial future. He says now is when the Burnham's should start focusing on retirement because most young people don't realize how fast time goes by.
"Most people don't start saving until their 40s or 50s which is obviously too late. You haven't allowed time to help you accumulate money," Walker said.
Saving for retirement now is even more important for young people because they may not have the same benefits that their parents and grandparents had.
"I'm not going to have social security by the time I retire. There won't be anything there," Burnham said.
"Social security may be available for people, but I believe it will be kind of a welfare kind of program in 20 or 30 years. You'll have to qualify for it or there could be reduced benefits," Walker said.
Walker recommends young people start saving a minimum of 15 percent of their gross income now toward retirement even though they may not be thinking that far ahead. The later you wait to start saving, the higher percentage of your income you'll need to save to meet your desired goals. If you wait until you're 40, you'll have to save more than 35 percent of your income to reach the same level of savings at retirement. Keep in mind, that will be at the same time you are trying to pay for your children's college education.
"It's hard for us to say we're saving a lot for retirement because we really don't even think about it yet," Burnham said.
Walker says if your company has a 401K program and will match your contribution that's one way to save for the future.
"We started 401K's but we got so deep into credit card debt, we had to actually cash them in to pay off stuff," Burnham said.
The Burnhams have since started their 401K's over. Walker says the 401K will eventually be taxed but there is no way to know what rate it will be taxed at. So if that concerns you or your employer won't match you on 401K contribution it might be better to consider Roth IRA's.
"A Roth IRA is the money you put into it after tax so you have to pay taxes now, but the money accumulates tax-free forever," Walker said.
Walker says retirement will look different in the future than it does today. And suggests young people rethink it.
"I recommend people find jobs they enjoy doing because they may have to work longer than their mom and dad did," Walker said.