Young people, listen up. A couple of retirement surveys released in the last month provide information that you can capitalize on if you act quickly.

An important point of both surveys: You may not have complete control of your work destiny when you get older, so plan accordingly. For instance, a global retirement survey by AXA Equitable reveals that one-quarter of middle-income folks were forced to retire early. Another retirement study commissioned by Nationwide Financial indicates that 30 percent of workers retire earlier than expected “because they have to, due to illness, disability, layoffs or some other reason beyond their control.”

So how can you capitalize on this rather negative news? You can take preventive measures by investing in a retirement plan now, even though retirement may seem like a goal that’s light years away. The reason: You have time on your side, and time is your best ally when it comes to getting rich.

Yes, you can get rich and then you’ll be in a much better position to deal with life’s adversities should they afflict you in midlife which, trust me, arrives much sooner than you might think.

Early Shirley and late Nate
Consider the tale of Shirley and Nate.

Shirley’s not particularly organized or ambitious, but she had the advantage of attending a seminar while still at college where she learned about the magic of compound interest.

So at age 25, after graduating from college and landing a job, she opened a Roth IRA and began contributing $4,000 a year to it. She chose a moderately aggressive balanced fund within her IRA that invested mostly in stocks, with limited exposure to bonds. It produced annual returns of 9 percent on average.

Shirley did this even though she owed money on college loans. She continued to invest until she turned 35, at which time the account was valued at $60,772. Then she stopped and invested nothing more, but continued to earn 9 percent annually in the account. At age 35, her life intersected with Nate’s.

Nate was quite ambitious and owned all the latest technological gadgets. But he had put off investing because, well, he was about driving cool cars and impressing women and he just didn’t want to think about retirement. Retirement was for old people. He finally started investing $4,000 annually at age 35 because Shirley put him up to it. In fact, that marked their first fight, among many.

Nate invested this amount for 20 straight years in a mix of funds that also returned 9 percent annually on average. When he turned 55, his account was worth $204,640 — less than Shirley’s account value, which by then had grown to $340,591. Nate’s total outlay of $80,000 was twice that of Shirley’s. And oh, by the way, the two had split up eons ago, after only investing six months in the relationship.

Nevertheless, Nate continued to invest $4,000 a year for another 10 years until he turned 65, when his account value reached $545,230. But guess what? Shirley’s account at age 65 was worth more than $806,303.

You can see for yourself how starting early puts oomph behind your retirement fund using
Bankrate’s compound interest calculator.

Workplace options
This tale serves to show how time can work to the advantage of young investors. But it’s not a guide to follow precisely. In the first place, Shirley wouldn’t stop investing at age 35. She’s too smart for that.

A better strategy would be to invest a percentage of your income regularly in a tax-advantaged retirement account, if one is offered at your workplace, particularly if your employer offers a matching contribution. For example, if your employer offers a 50 percent match of up to 5 percent of your salary, you’d be passing up an instant 50 percent return if you didn’t contribute at least 5 percent of your money to the plan.

At a minimum, take full advantage of the company match. But if you can manage it, contribute 10 percent or more of your income.

If your employer offers an automatic enrollment plan and you don’t opt out, the plan will determine how much to take out of your paycheck and which investment to put it in. Of course, your employer will have to let you know all those details in advance. Take a look at them. If it’s not enough, opt to have a higher percentage deducted from your paycheck. Whatever you do, don’t opt out.

If your employer doesn’t offer a plan at all, an IRA serves as a decent backup plan. Keep in mind, too, that your money isn’t necessarily tied up for decades. You can withdraw up to $10,000 to use for a home purchase from a
Roth IRA in certain cases without paying a penalty.

Advice to heed and ignore
A lot of folks, both young and old, are not sure how to juggle their finances. It’s not hard to understand why. They’re often hit with conflicting advice even from financial experts.

For instance, The Wall Street Journal published a story recently on the subject of financial priorities in which a vice president of financial planning at The Schwab Center for Investment Research said, “Don’t even bother saving for retirement or saving for college if you haven’t paid credit card debt.” In the same article, a financial adviser for T. Rowe Price advises paying off debt while saving for retirement and an emergency fund.

I agree with the guy from Price. While it’s true that paying off high-interest credit card debt is always a good idea, it’s just not good advice to hold off on investing here in America, where the average household carries a $5,100 credit card balance, according to the
Federal Reserve’s Survey of Consumer Finances. If they wait until they’ve paid off their credit cards, the majority of Americans would forgo investing altogether because they’d be focused on this one area of their finances rather than on the bigger picture. Unless they can eradicate debt very quickly, they’d miss out on the magic of compound earnings.

The same goes for student loan debt which, by the way, is tax-deductible. If you happen to be stuck with a private student loan with a high interest rate, by all means, go on an accelerated payment plan and get that off your back. But try to allot something — even a small amount of your pay — to a retirement plan.

Focus on the present
We should apply our multitasking skills in our personal finances. So a good strategy would be to pay off debt from the past and invest for the future at the same time. Of course, you can’t have everything and you’ll likely have to give up something. How about rethinking some of the urgent needs that you have in the present?

For instance, rather than be swayed by the whims of fashion, why not go for a basic look that will endure? How many pairs of shoes do you need? And who says you have to pay $40 or $50 for a haircut? You can find a good hairdresser and get the job done for half the price. And why spend a lot of money making a landlord rich so you can have a spacious apartment? And what is the most important function of your car — to convey status or convey you from one place to another?

You get the idea. Rethink your priorities, because chances are you can easily let go of some of these “necessities” and build yourself a fortune instead.  

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning. If you have a comment or suggestion about this column, write to
Boomer Bucks.