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Beach bonfires, sunrise sound-bath meditation, and yoga sessions mixed with high-level financial discussions on everything from bitcoin to bonds: That’s the Future Proof Festival, which took place last month in Huntington Beach, Calif.
More than 4,000 wealth advisers and vendors from across the country came to talk about investment strategies, learn about buzzy fintech, and scarf down tacos and ice cream while singing along with Third Eye Blind and the X Ambassadors.
One afternoon I popped into the Vanguard Investments tent to sit down with Colleen Jaconetti, a senior investment strategist for Retirement Solutions at Vanguard. Jaconetti’s focus for the past two decades has been financial planning and digging into the balance between spending on immediate needs and saving for the future.
Here's what Jaconetti had to say, edited for length and clarity:
Kerry Hannon: You’re known for your behavioral coaching. What is a key driver to saving for retirement?
Colleen Jaconetti: The most important thing is recognizing that if you want to have enough to live on in retirement, you have to start saving early and have a portfolio with low costs.
For a lot of the young people, it's hard to take money out of their current paycheck for retirement. They’re focused on paying their bills right now. The discipline and the understanding that foregoing something in your early years can pay huge dividends is hard to get your hands around. That discipline helps you hold steady when markets get shaky, which is a key to long-term investment success.
Some of it is just people's personality. I have one nephew who likes to spend his money as soon as it's in his hands. It’s his natural inclination. He's very generous. I'm not criticizing people who spend more. They want to enjoy their life. But it’s harder to get someone like that to understand the value of savings.
Then the second part is education. While you really want to spend now, if you understand that if you save it now that means you can maybe retire three years earlier. That makes it a more tangible thing for younger people.
It helps to understand the trade-offs of small sacrifices. You need to see where in your budget you can consider trimming.
Read more: Retirement planning: A step-by-step guide
What advice would you give a young person just starting to save for retirement?
Set enough aside in your employer-provided retirement plan to at least get the employer match. Many employers contribute anywhere from 50 cents to $1 for every $1 an employee contributes, up to 3% or 4% of their salary. Ideally, workers should aim to save 15% of their pre-tax income each year, including any match. Giving up the employer match would be a huge disservice to yourself.
