Like many within my peer group, I have often put retirement planning on the back burner of personal finance. Growing up, money was always tight. So immediate needs took precedence over long term goals. We were constantly budgeting and finding ways to stretch our monthly budget. As a college student, contributions towards a retirement account were less important than tuition payments. After graduation, I concerned myself more with paying back my student loans and building an emergency fund. I always had larger concerns…that is until I had my retirement planning panic attack.
Retirement Planning Reality Check
I started out luckier than most. I graduated college without taking student loans from large financial institutions. However, I still needed personal loans and full time jobs to float me for periods of time. Nevertheless, I depleted my savings to obtain a diploma. As I entered adulthood, I found myself in a very unusual situation. While I did not carry debt, I was starting from nothing. My financial portfolio was a blank slate. Even though I had no loan payments, I was living from paycheck to paycheck and barely saving anything. Creating a retirement account was a low priority as I tried to keep a roof over my head. I was able to stay out of the red, but there was no long term financial security.
Once I became gainfully employed, I finally had some breathing room. My savings accounts grew, and life in general stabilized. Knowing how hard I had worked to earn that money, I was hesitant to risk it in the stock market. Since I had no experience with investing, I shied away from it. Instead, my funds remained parked in low interest savings accounts for years. Part of me bought into the American ideal that hard work and saving would be enough to sustain me. When friends brought it up in conversation, I avoided the entire topic. Then, as always, there comes a point when you can no longer ignore your problems and must face them head on.
Assessing My Retirement Plan
As I started paying closer attention when friends discussed retirement planning, I realized I was in trouble. My accounts were nowhere near the recommended levels for my age group. Furthermore, I had never even looked into opening retirement accounts. Although I had always maintained my savings accounts, I had never really made a long term financial plan. I needed help, so I decided to hire a financial advisor.
Returning home after a decade teaching abroad, I had saved a significant lump sum. I researched the best retirement accounts for me and wanted to start investing. It was a lot of information to take in, especially as a beginner. The additional regulations for living overseas complicated things even further. I couldn’t use foreign income for Roth IRA contributions and was ineligible for many of the most common types of accounts. Many institutions turned me away because they did not want to deal with international investors. I did not feel competent enough to manage my portfolio as an individual investor, yet could not find a broker who would take my money.
At this point, I was out of options. This also happened to be the exact moment my panic attack started. I was angry with myself for having neglected it, desperate to fix the problem, and unable to think clearly. I felt like I was drowning in problems and every avenue out was closed to me. However, the only way out of this problem was through it.
Making a Plan of Action
Not knowing what else to do, I turned to my dad for advice. He was able to direct me to a broker at a reputable firm who he had worked with before. The broker assured me there were ways he could help to get me started. We sat down to discuss my long term goals, and made a plan of action that would help me reach them. As he explained my options, I realized things were not as dire as I had thought them to be.
My first step in building my portfolio was to open a Roth IRA. I maxed out my annual contribution, limited only to my domestic earnings. All the money I had made overseas was directed towards mutual funds. He recommended a few investing groups and discussed the past performance of each. Looking at consistent gains and positive long term projections, I bought into three investing groups. Once I had a path forward, I felt like I had a better handle on my personal finances. Setting long term goals gave me clarity and calmed the concerns that led to my panic attack.
Retirement Planning Education
This whole process has taught me a valuable lesson. I recognized that there was a large learning gap in my education. Economic and finance courses had never been a requirement for me in school. So, I sought out ways to catch up with self-directed courses. There are some excellent resources out there for novices like myself. Morningstar offers an entire online library with 172 classes specifically designed for beginners. You can also take free online courses through universities like Yale, Harvard, and Purdue. Emory and Vanderbilt even post their content on their YouTube channel.
The important thing is to get answers when you have questions. In the digital age, there are endless resources available to you. Over time, I began to feel more confident speaking on the subject and asking questions when I did not. Although I still have a lot to learn, I definitely feel more secure about my financial future. Playing with small amounts of money with investing apps has also allowed me to test different strategies without risking my savings. However, I know I will never be an expert and will need advice at times. Before making any major decisions, I always get a second opinion.
Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.